One of the drawbacks of delaying a necessary bankruptcy is that when debtors eventually file bankruptcy they have no money left. Many debtors consider bankruptcy when they are out of income and have burned through their cash savings. The logic goes something like this: "Well we've tried everything; we're out of money so I guess we're really bankrupt, so let's file bankruptcy." But the reality is that those cashless and basically destitute individuals were bankrupt a long time before they ended up with no cash. Below are two important reasons why you should never wait until you're at your last dime to file bankruptcy:
- Filing bankruptcy is not free. And while a Chapter 7 bankruptcy is cheaper than Chapter 13 or Chapter 11 bankruptcy, it still costs money. Some bankruptcy attorneys do offer payment plans but if you're filing Chapter 7 bankruptcy, the fees must be paid before you file your bankruptcy petition because paying afterwards is illegal.
- Bankruptcy is designed to protect your assets and prevent you from ending up penniless. So many debtors squander this opportunity to protect cash and other assets via bankruptcy because they exhaust all of their assets before filing bankruptcy. Filing bankruptcy before you deplete your assets gives you a stronger foundation on which to build your financial future.
What debtors should do is take the time to access their financial situation and at the start of financial troubles they should say to themselves, "If I am not able to turn this around by this date or when I'm down to this much money in the bank, then I'm going to consider bankruptcy." That way they can at least talk to a bankruptcy attorney and find out what bankruptcy can do for them before they burn through all of their cash.