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When to Declare Bankruptcy

Adam Mack, J.D.
Hillary Stirling, research assistant.
Let’s face it – no one wants to have to declare bankruptcy. It’s a last resort for almost everyone. However, bankruptcy is necessary for many people for a variety of reasons. If you’ve been down on you luck financially for a while, it might be hard to know when to declare bankruptcy.

Signs It Might Be Time to File
The decision to file bankruptcy is a very personal one that should be made with the help of a qualified Kansas bankruptcy attorney. However, there are some common red flags that can help you know if you should explore your legal options.

First and foremost are payday loans. If you are relying on payday loans to make it from paycheck to paycheck, it’s a clear sign that you’re struggling financially. Another sign it’s time to look into bankruptcy is if you’re being hounded by creditors who call constantly. Other common signs include your house being in foreclosure, your wages being garnished, or considering cashing out your retirement accounts prematurely.

When It Might Be Time to File

If you decide you need to file bankruptcy, timing becomes important. Generally speaking, it’s often better to file earlier in the year than later. This is because the trustee will be able to claim some of your coming year’s non-exempt tax refund. How much the trustee gets to keep depends on the percentage of time left in the year. (So if you file in June, the trustee can keep approximately half of your non-exempt refund but if you file in March, the trustee can keep around a quarter of it.).

Another factor to consider when it comes to timing is the date you file. The trustee will require proof of the amount of money that was in all your financial (i.e. bank) accounts on the date of filing, usually in the form bank statements. You will be required to surrender all of that money later on in the case, so filing on the date after you are paid could hurt you financially. .
There are other issues related to timing that will vary depending on your individual circumstances. Such issues might include (but are not limited to) whether or not you have a house in foreclosure, whether you’ve recently experienced a medical emergency, if you have property that’s been repossessed, or if you have pending lawsuits (including divorce proceedings).

The Most Important Part

The purpose of bankruptcy is two-fold: to give the debtor a fresh start while giving the creditors their fair share. If you’d like a fresh start, contact us today to learn if bankruptcy is the best option for you or if there’s another path to financial freedom. Either way, your peace of mind is worth the time it takes.


These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!