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When to Consider Filing Bankruptcy

When to seriously consider filing bankruptcy depends on your circumstances and is different for everyone. There is no clearly identifiable time when you should consider this. Instead, you need to consider multiple issues and make the decision after doing so. However, there are certain problems that are likely to trigger considering bankruptcy. Our friends at the Law Office of Jeff D. Hoffman have provided different triggers to consider when filing bankruptcy. 

Practical Concerns

If you can see that you will become unable to pay your debts, such as debts for credit cards or medical work, you could be proactive and begin considering bankruptcy before you fall behind on your payments. In addition to avoiding the stress and annoyance of creditors hounding you for money after you fall behind and even getting sued, the advantage of proactively considering bankruptcy before you get behind on your debt payments is that you could put your debt problems behind you and get a fresh start sooner rather than later. On the other hand, short of a creditor getting a judgment against you (which would be on your credit reports), having your pay or bank account garnished, having your vehicle repossessed, or having your home foreclosed, there is no financial or legal disadvantage to waiting a short time to file bankruptcy.

If you are facing foreclosure of your home or repossession of your car, you should immediately consider bankruptcy. You must file bankruptcy before those properties are taken away from you in order to save them. State laws govern foreclosure and repossession procedures, so you need to contact a local bankruptcy attorney to determine when you would need to file in order to save your property.

If you owe income taxes, you may want to wait to consider bankruptcy. “Old” tax debt (at least 3 years old) is dischargeable in bankruptcy if certain requirements are met, while newer tax debt is not. The date used to determine whether tax debt is old or new for the purpose of it being dischargeable in bankruptcy is the date that the tax return for that tax year was due or, if you got an extension, when the return pursuant to the extension was due. For example, in June 2021, income tax owed for the tax years of 2017 and earlier are dischargeable in bankruptcy because the tax returns for those years were due April 15, 2018 and earlier. However, if you got an extension for your 2017 tax return, that return was not due until October 15, 2018, so the tax owed for 2017 would not be discharged in bankruptcy unless you wait until after October 15, 2021 to file.

Using Credit Cards

Using a credit card is borrowing money. Borrowing money with the intent not to repay it is fraud. Therefore, you may not use credit cards before filing bankruptcy. There are some exceptions to this, but a good rule of thumb is to stop using these cards. If you charge more than $650 in luxury goods and/or services on a credit card within 90 days of filing bankruptcy, the debt that you incurred for those charges is presumed to “fraud,” and that portion of that credit card debt would not be discharged in bankruptcy unless you successfully rebut that presumption. (To be clear, this does not apply to debit cards because the money charged on those cards is not a loan; it comes directly out of your bank account.) Anything aside from basic necessities like food, housing, basic clothing, and utilities could be deemed to be a luxury. Therefore, if you need to use credit to buy some things that may be considered luxuries, you should wait at least 

90 days after that purchase to file bankruptcy. Be aware that purchasing luxuries with a credit card more than 90 days before you file bankruptcy could also cause that debt to not be discharged for the same reason (for example, if there is no way based on your income that you could realistically repay the debt), but that debt would not be presumed to be fraud and the creditor would have a higher burden of proof to convince the bankruptcy court that it is.


There are many factors to consider when determining when to seriously consider or file bankruptcy. In some instances this is a mathematical calculation, in others it is a legal decision, and then in there are those times when it’s a personal decision. You should weigh each factor carefully before deciding when to contact a bankruptcy attorney or when to file bankruptcy.