A bankruptcy covers the debts that exist as of the time your case is filed, not future debts. So how do you know when to file your case?
If you’re feeling overwhelmed by your present debts so much that you’re considering bankruptcy, you’re not likely worrying much about future debts.
Or maybe you are.
Maybe you’re dealing with a medical issue and are very concerned about how you’re going to pay for future medical expenses. You’re already feeling overwhelmed by your present debts. But you’re wondering if you should wait to file bankruptcy until after you’ve finished incurring new medical debts.
Or maybe you’ve been relying on credit cards, cash advances, or other credit to get by day to day. You owe a lot of money and don’t see how you could ever pay it all. So you know you need some relief from these debts. But right now you’re afraid of being cut off from these sources of credit. So you wonder whether and when you should file bankruptcy.
Bankruptcy Only Includes Present Debts
In these and many other situations a good starting point is to recognize that the timing of your bankruptcy case is crucial. Debts that legally exist at the time you and your lawyer file your bankruptcy case are included in that case. Future debts are not. So in a Chapter 7 “straight bankruptcy” case, only the existing debts can be discharged (legally written off). In a Chapter 13 “adjustment of debts” case usually only those existing debts can be included in your payment plan.
The Best Advice? Get Some Good Advice
The two situations mentioned above—the medical and relying-on-credit ones—are not easy to resolve.
Sometimes knowing when to file bankruptcy IS pretty straightforward. Somebody needs relief from a lawsuit or wage garnishment or vehicle repo or home foreclosure, and needs it now.
But it’s not so simple in these two situations. If you can’t pay your present medical and other debts, but want to wait to file bankruptcy to include those upcoming medical debts, what do you do about the debt collectors in the meantime? If you can’t pay your living expenses without using new credit, how do you get out of that vicious cycle?
The honest truth is that it depends on your unique situation. Because you are unique, the solution will be unique to you.
There is no cookie-cutter answer because you’re not a cookie, a gingerbread man. You’re an individual with individual circumstances needing individual advice.
For that advice to be worthwhile it needs to come from someone who understands you and your situation, who is competent about your legal options, and who can sensibly match your unique situation to the best option.
That “someone” is your bankruptcy lawyer. He or she is legally and ethically required to strictly serve only you and your interests. Your lawyer has likely helped hundreds if not thousands of people, with everything from relatively simple to extremely complicated situations. He or she has not seen a situation exactly like yours but has seen many very similar ones. Your lawyer has spent a career wrestling through tough situations like yours.
Thorough Knowledge and Good Judgment
A competent lawyer gives you not just knowledge about legal options; you should also get the benefit of good judgment. You need somebody who will help you find the best way out what may feel like an impossible situation. In fact you may have a serious Catch-22. Maybe (as in the medical example above) you simultaneously need bankruptcy protection now AND need to wait to file later. It takes someone who knows the law intimately and understands your situation fully to craft that unique best path forward for you.
In our next blog post we’ll demonstrate some good judgment by a bankruptcy lawyer. We’ll show how two similar medical-debt timing situations result in very different legal advice.