When Should You File Bankruptcy?
With the U.S. Congress recently passing legislation overhauling the nation’s bankruptcy code, and President Bush signing it into law, debtors who are facing increasingly desperate financial situations may not have the opportunity to find relief under bankruptcy after the new laws take effect. There are approximately five months before the new laws are applied and experts expect an increase in bankruptcy filings in the meantime.
“The new laws are a gift from Congress to the banking industry and will deny previous bankruptcy protection to many of the Americans that need it most,” said Steve Rhode, president of Myvesta, a nonprofit consumer education organization. “The current laws are much more consumer friendly and it might be in the best interest of consumers who have been considering filing to explore the option before the new laws go into effect.”
According to Rhode, when considering filing for bankruptcy it is important to evaluate whether or not bankruptcy will help your situation.
“Many people make the mistake of waiting too long and making their situations much worse before filing,” Rhode said. “It’s all too common to see people taking out new loans, tapping into savings or raiding their retirement accounts only to delay the inevitable and end up filing for bankruptcy in the end after all is lost. Now they have all the negative aspects of being a consumer who filed bankruptcy, and they’ve liquidated their life’s savings as well.”
Bankruptcy cannot protect individuals from all debts though; according to Rhode bankruptcy protection may not address debts such as student loans, past due taxes, child support or alimony.
“In the end, if you are not sure whether or not bankruptcy can help your situation, make an appointment with a bankruptcy attorney in your state and discuss your options,” Rhode said. “It doesn’t mean you have to file, but by sitting down with an attorney you will become better educated about your options and you can make a more informed decision.”
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