When to File for Bankruptcy

The bankruptcy process can be a viable option in circumstances where individuals find themselves facing overwhelming financial challenges. But it’s not something that’s right for everyone and should never be taken lightly. The experienced lawyers at Arnold Law Group, APC, are here to help people talk through their options and decide if and when to file for bankruptcy in Fresno. 

We serve individuals and businesses throughout the Fresno area. Call the office at (559) 900-1263 or use our online contact form to schedule an appointment.

5 Reasons People File for Bankruptcy 

There are a lot of life circumstances that can put people in the difficult position of deciding if bankruptcy is their best option. Some of the most common reasons are these: 

• Creditor Action: If creditors are taking legal action against you to collect the debts you owe, it may be a sign that your financial situation has become unmanageable. Filing for bankruptcy can provide immediate relief by putting an automatic stay on these lawsuits, halting collection efforts, and giving you time to reorganize your finances.
• Foreclosure Looms: If you are struggling to make mortgage payments and your home is at risk of foreclosure, filing for bankruptcy can help you save your property. Under Chapter 13 bankruptcy, an automatic stay is placed on foreclosure proceedings, allowing you to catch up on missed payments through a manageable repayment plan.
• Living Off a Credit Card: If you find yourself relying on credit cards to cover basic living expenses such as groceries, rent, or utilities, it is an indication that your financial situation is dire. Continuing on this path can lead to a never-ending cycle of debt and high interest payments. Filing for bankruptcy can help eliminate or restructure these debts, freeing up your income to cover essential expenses without relying on credit.
• Credit Juggling: If you are resorting to using one credit card to make minimum payments on another credit card, it is a clear sign of financial distress. This practice, known as "robbing Peter to pay Paul," only prolongs the inevitable. Bankruptcy can provide a fresh start by wiping out or restructuring your debts, breaking the cycle of debt dependency.
• Living Off a 401(k): Tapping into retirement savings to cover daily expenses or debt payments should be a last resort. Withdrawing funds from a 401(k) account can result in penalties, taxes, and the loss of potential future growth. Filing for bankruptcy can offer an alternative solution by addressing your debts and providing a more sustainable financial path without jeopardizing your retirement savings.

Please be aware that there is no automatic “Yes or No” answer to the question of when to file bankruptcy. The above circumstances are all serious red flags, but every situation is unique, and your ultimate decision should come after serious consultation with an attorney. 

Arnold Law Group, APC, can be reached by calling (559) 900-1263.

Breaking Down Your Cost of Living

To better understand and assess your financial situation, it is helpful to categorize your total debt into two columns: 

• Installment Payments: This includes obligations such as your mortgage or rent, personal loan payments, vehicle payments, and minimum credit card payments.
• Monthly Living Expenses: This should encompass items like prescription medications, groceries, clothing, vehicle maintenance, gasoline, and your cell phone bill.

In addition to evaluating your expenses, it is essential to determine your average earnings from all jobs or other sources of income. Look at your net income, which is the amount you actually bring home after taxes and deductions. Avoid including speculative future earnings or potential bonuses that may or may not materialize in the future.

By analyzing these figures, you can gain a clearer understanding of your financial situation and make more informed decisions moving forward.

Making an Honest Financial Assessment

Here are three key factors to analyze in making the decision on if and when you will file for bankruptcy in Fresno:

• Are the expenses more than your earnings? If your expenses consistently exceed your earnings, it becomes increasingly challenging to manage your debt payments and meet your financial obligations. This imbalance can lead to a never-ending cycle of accumulating debt and financial stress. Filing for bankruptcy may offer needed relief. 
• Do you anticipate your wages going down in the near future? Another important consideration is the stability of your income. If you anticipate a decrease in your wages or a potential job loss, it can significantly impact your ability to repay debts. A decrease in income can make it even more challenging to meet your financial obligations and keep up with monthly installment payments. 
• Do you anticipate an increase in your monthly installment payments or living expenses? These changes in your financial circumstances can put additional strain on your budget. If you foresee these costs rising beyond what you can reasonably afford, it may be necessary to explore debt relief options like bankruptcy. 

In order to make this work, your assessment in these areas has to be honest. Our natural tendency as human beings is to believe if we ignore a problem, it will go away somehow. Unfortunately, this strategy simply does not work and ultimately makes a bad situation much worse. 

Consulting with our qualified bankruptcy attorney can provide invaluable guidance and help you determine the most appropriate course of action based on your unique circumstances.

Experienced and Empathetic Legal Counsel

We know that no one wants to face bankruptcy or ever planned to be in this situation. Our job isn’t to judge our clients. Our job is to help them find a new beginning, and we take that job very seriously. The legal system, including the bankruptcy process, is here to protect ordinary people. But for that to happen, ordinary people need a lawyer who works hard, understands the system, and fights for their best interests. That’s the kind of lawyer people find when they come to Arnold Law Group, APC. 

If you’re trying to decide if and when to file for bankruptcy, don’t hesitate to call us at (559) 900-1263 and schedule a consultation.