When to File Bankruptcy: Should you consult a bankruptcy attorney first?


If you’re a St. Louis resident considering a Chapter 7 bankruptcy or Chapter 13 bankruptcy, it’s important to know when to file bankruptcy and whether or not bankruptcy is the right choice for you and your finances.

The Law Office Of Charles Huber, a local bankruptcy law practice that has been providing bankruptcy help to the St. Louis community for more than 30 years, primarily focuses on consumer bankruptcy. Over the years, this St. Louis bankruptcy attorney’s office has become one of the most well-respected, reputable and established bankruptcy lawyers in all of Missouri due to its commitment to guiding you through the legal system and helping you solve your financial woes.

Falling into unexpected and overwhelming debt happens to plenty of people every day — and it’s certainly nothing to be ashamed of. In fact, as many as two million Americans in 2013 were affected by bankruptcies related to unplanned, overwhelming medical expenses and debts. Unplanned job loss is another common cause behind bankruptcy filings in the United States. If something similar has happened to you, you shouldn’t have to let it take over your life.

That’s where a bankruptcy filing can help you. Contrary to sensationalized media depictions of bankruptcy as the end of one’s financial well-being, a bankruptcy doesn’t have to be scary. After filing bankruptcy, thousands of people just like you are able to get a fresh financial start and get back on their feet with healthy spending and saving habits.

Should you file bankruptcy?
Do you require a bankruptcy to help you get out of those seemingly endless mountains of debt, or can you change your budgeting, spending and saving practices to turn your finances around? Knowing when to file bankruptcy — or whether or not to do it at all — is a decision many people grapple with. Here are a few signs that can help indicate whether or not a bankruptcy is the best choice for you:

  • You only make the minimum payments on your credit cards each month

If you only have enough money on hand after each paycheck to make the bare minimum payments on your credit cards — or if you’re unable to make those minimum payments at all — there is likely a problem. When you make the minimum payment, you rack up interest on your debts fast, making it nearly impossible to pay off your debt this way.

  • You face constant phone calls from debt collectors and creditors

Another sign that helps you understand when to file bankruptcy? Frequent, harassing calls from your creditors or debt collecting agencies. These calls can quickly take a toll on your mental well-being, piling on stress you don’t need — you’re already well aware that you owe money, and having constant reminders only adds to your financial anxiety.

  • You purposely avoid looking at your finances

>If you can’t remember the last time you’ve looked at one of your bank statements because you’re afraid to see those numbers in black and white, you definitely have a problem. Ignoring your finances is not only a bad habit to get into; it’s an indicator that your finances have become so dire that you can’t bear to face reality.

  • You pay for your basic necessities with credit cards

You should be able to pay for the food and necessities you need with your income. If you find yourself getting into more debt just to survive, it’s a sign that something’s wrong.

  • You use credit cards to make payments on your existing debts

If the only way you can afford to pay your existing debts is to take out even more debts to make your payments, you’re entering into a cycle of racking up debt that’s nearly impossible to escape.

  • You don’t know how much money you actually owe

Everyone who has debt should have a clear idea of how much money they owe to their creditors. It’s a key part of staying on track with one’s finances. If you’ve lost track of how much debt you have, you might be spiraling into more debt than you can handle on your own.

when to file bankruptcyIf more than two of the above statements apply to you, you should consult with a bankruptcy lawyer to go over the options available to you. A bankruptcy is, in the most basic terms, when you owe more debts than you can afford to pay. If this description sounds familiar to you, it might be time to voluntarily file a bankruptcy with the help of the qualified bankruptcy lawyers at the Law Office Of Charles Huber.

Understanding personal bankruptcy: The difference between Chapter 7 and 13
There are two forms of bankruptcy that are intended for consumer, or personal, bankruptcies: Chapter 7 and Chapter 13 bankruptcy. Simply put, only individuals can file these two forms of bankruptcy, not businesses or other multi-person entities.

While Chapter 7 is the most common type of bankruptcy, with 728,833 Chapter 7 bankruptcies filed across the country in 2013, it isn’t the right type for everyone. Approximately 333,626 people filed Chapter 13 bankruptcies that same year for this reason. Both forms of bankruptcy offer a way out of unmanageable debt, and both types of bankruptcy offer instant protection against your creditors — but the two are ultimately very different.

To understand more about the differences between Chapter 7 and 13 bankruptcy, here’s a quick look at what each form of bankruptcy involves:

  • Chapter 7 bankruptcy

During a Chapter 7 bankruptcy, sometimes referred to as a straight bankruptcy, a bankruptcy trustee discharges, or cancels, all of the filer’s applicable debts in exchange for a liquidation of the filer’s assets. Most forms of debt are dischargeable during a Chapter 7 filing, with the exception of student debt, unpaid taxes, unpaid child support payments and a few other types of debt.

There are a few advantages to filing a Chapter 7 bankruptcy — the most obvious one being that you never have to repay the debts that are discharged. This form of bankruptcy is also fairly quick, usually only taking three to six months to complete, meaning you get relief from your debt fast.

However, you must first prove that your income falls below the average income level of your home state before your filing proceeds. If your income is higher than the state average, you’ll have to otherwise prove that you don’t have enough disposable income to repay your debt.

Additionally, Chapter 7 bankruptcies will remain on your credit report for 10 years after you file. While this won’t make it impossible to get financed for major purchases, it will make it a slight challenge to rebuild your credit. Chances are, your credit score wasn’t looking good before your bankruptcy, anyway. Many people are actually able to buy homes even with a recent bankruptcy on their credit record. Building up your credit score after a bankruptcy is simply a matter of making consistent, on-time payments on your bills.

  • Chapter 13 bankruptcy

Unlike Chapter 7, which discharges your debt, a Chapter 13 bankruptcy — also called a reorganization bankruptcy — sets up a debt repayment plan for you to follow over a predetermined period of three to five years. Many people with a consistent and predictable source of income opt for this form of bankruptcy, as making Chapter 13 payments is fairly easy.Best of all? If any of the filer’s initial debts are left over after the repayment period ends, these debts are forgiven. You also don’t have to surrender any of your assets to your creditors, as a Chapter 13 bankruptcy is not a liquidation. Many filers are drawn to Chapter 13 because they feel a strong moral obligation to repay their debts, as well.

when to file bankruptcyWhich form of bankruptcy is right for you?
In most cases, it’s more advantageous for an individual to file Chapter 7 bankruptcy, because the financial hardship that led them into his or her bankruptcy will make them unable to follow a debt repayment plan. In fact, most people who file Chapter 13 bankruptcy don’t end up successfully completing their repayment plans.

The fact that Chapter 7 rids you of all your debt is also hard to ignore. Most filers don’t end up losing any of their property during the Chapter 7 liquidation process, as federal laws protect you from losing your home or vehicle during your bankruptcy filing.

However, if your income is too high for you to qualify for a Chapter 7 bankruptcy, you can consider filing with a Chapter 13 bankruptcy lawyer instead. If you own a business or have a great deal of assets — such as a second home — you might want to opt for Chapter 13, as these assets won’t be taken from you during liquidation. Ultimately, you should seek advice from an experienced bankruptcy lawyer before opting for Chapter 13 bankrutpcy.

Pre-bankruptcy planning: What you need to do before filing
Whether you’ve decided to file Chapter 7 or Chapter 13 bankruptcy, there are a few things you will need to do before you file bankruptcy with the court. You will likely need to complete credit counseling and debtor education, and file your certificates of completion with the bankruptcy court at the appropriate time.

If you haven’t filed your income tax returns for at least two years before you decide to file bankruptcy, you will need to work with a financial adviser to complete this. Not filing your income tax returns will stop your bankruptcy in its tracks, as this tax information is necessary to accurately paint a picture of your total earnings.

There are some things you should definitely not do before filing bankruptcy, as well. Never provide false or inaccurate information about your finances during your pre-bankruptcy meetings with creditors. To do so is technically perjury, and could carry a severe penalty in addition to jeopardizing your bankruptcy.

when to file bankruptcyKnowing when to file your bankruptcy
So you’ve decided you need to file bankruptcy with the help of a bankruptcy attorney and have taken all the pre-bankruptcy steps required — what comes next? When is the right time to file bankruptcy? Your bankruptcy lawyer will likely tell you when to file bankruptcy for the best outcome, as it varies for each individual’s unique situation.

Additionally, your attorney will have the experience needed in order to completely and accurately fill out your bankruptcy paperwork. More people than you think have their bankruptcy filings thrown out by the courts because of a clerical error — don’t be one of these people! If your bankruptcy gets thrown out of court, you will have to wait several months before you’re permitted to file again.

If you have more questions about when to file bankruptcy, the Law Office Of Charles Huber is happy to offer help with filing bankruptcy in St. Louis at every step of the way. Bankruptcy can be a complex, labyrinthine system that seems daunting at first. The right legal counsel can help make this legal process simple and stress-free. It can be hard to admit that you need help with your debt, but our bankruptcy attorneys are dedicated to helping you find your financial footing again.

Whether you plan to file a Chapter 7 bankruptcy or Chapter 13 bankruptcy, you shouldn’t have to go it alone. Feel free schedule a free consultation with us, or to ask us anything in the comments below.