As soon as you realize you are struggling to maintain your debt obligations, you should speak to an attorney. An ethical attorney will not push you to file bankruptcy but will provide you the advice you need to make your own informed decision. I offer a free, no-hassle consultation. I do not send unwanted follow-up emails or phone calls after the the initial consultation. I leave the decision of whether or not to proceed entirely to you.
The biggest mistake I see people make is waiting longer than necessary to file. It is sometimes necessary to postpone filing for various reasons such as waiting several months after you left a high paying job for eligibility reasons. In most cases, if you are going to file bankruptcy get it over with as soon as possible. The sooner you file, the sooner you can stop wasting money on interest payments and start rebuilding your credit. In some cases, individuals wait until they are employed or until after a pay increase to file bankruptcy. Doing so can affect eligibility to file under chapter 7 or result in a higher payment under chapter 13.
In other cases, a debtor can avoid filing bankruptcy altogether by speaking with a bankruptcy attorney about their options sooner than later. Even when a person cannot avoid filing bankruptcy, speaking to a bankruptcy attorney as early as possible allows such individuals to develop a more effective plan to protect their assets from bankruptcy.
There is a lot of misinformation about the new bankruptcy law which was passed in 2005. Many individuals do not understand how accessible filing bankruptcy still is for most people. Do not make the mistake of listening to creditors who tell you that you do not qualify for bankruptcy or that a certain debt cannot be discharged in bankruptcy. Most debts are still dischargeable in bankruptcy. These include credit card debts, medical bills, payday loans, and deficiency balances on home and car loans. Most debts can be discharged in bankruptcy short of alimony, most government debts and student loans (absent a showing of undue hardship).
An honest and competent bankruptcy lawyer will not just file a bankruptcy petition on your behalf; in some cases, pre-bankruptcy planning is necessary to avoid pitfalls. For example, some debtors do not wish to include friends or relatives (insiders) in their bankruptcy. In such cases they may choose to pay back such individuals prior to filing bankruptcy. Paying insiders prior to filing bankruptcy is something you should avoid. The trustee assigned to oversee your bankruptcy will require you or your relative to return the funds paid prior to filing. The look back period is generally 2 years from the date you file. In some cases (with large assets) the look back period is extended to 4 years from the date you paid the insider. On a similar note, do not make the mistake of transferring asset to anyone prior to filing bankruptcy. In some cases, a debtor will transfer an asset to someone in order to protect that asset from liquidation in bankruptcy. Under Colorado Law most of your assets are protected from liquidation up to certain dollar amounts. Transferring the asset causes the asset to lose this protection. Speak to a bankruptcy attorney for more information on this topic.
These mistakes happen because of misconceptions on what bankruptcy does and how it works. Clients of my law firm never speak to a non-attorney regarding legal questions. You will deal with the same attorney throughout your case.