When should I talk to a bankruptcy attorney?

My clients come to me with varying ideas about when they should file for bankruptcy relief. Many of my clients who have never been behind on their debts in their life contact me before they miss their first debt payment, because they do not know what will happen when they miss a payment and it stresses them out. These clients are a bit early. Since they are usually not ready to decide whether they need to file for bankruptcy relief, they may find themselves paying for one-time consultation sessions about specific questions, but that can be good, because it will help them plan. Many of my clients who are accustomed to being behind on their obligations may not come until their first paycheck is garnished, their bank account is frozen for garnishment, or their home is scheduled for a foreclosure sale next week. These clients are a bit late, leaving little or no time for planning, and usually fast action is needed.

So when is the best time to start talking to a bankruptcy attorney? The truth is, it is never too early or too late, but please consider the following facts to help guide your analysis of whether you are early, middle, or late, and what an attorney can do for you at each stage.

Early: When you lose your income

At the time of a catastrophic economic reversal such as a job loss, an investment meltdown, a disability, or the disability or death of somebody who you have relied on for support, you need a plan. There may be several options and some of them may depend on your efforts to find new sources of income or restructuring your expenses. An attorney can help you understand legal and financial options that you might not see.

Early: When you become liable for something but don't know how much

If you have breached a contract, injured somebody, or damaged something, you may know you will have to pay for something but not know how much. An attorney can help you understand what you will probably be liable for and what you will not, how much it will cost to defend yourself in the event of a lawsuit, and other important factors. Knowing early on is better than finding out as it happens.

Early: When you incur a bill that is too big to pay

When you incur an unexpected medical bill, a large bill resulting from an accident or disaster, or when a bill that was once manageable no longer is, you need to know what to do to keep it from eating you alive. An attorney can help you understand whether you will be able to settle the bill or work out a payment plan, or whether these efforts are likely to succeed.

Early: When you miss your first debt payment

Most people who have not missed payments before do not understand what kinds of actions a creditor can take, how long it will take the creditor to take those actions, and what ways out there might be. An attorney can help you understand the procedures the creditors have to follow.

Middle: When debt collectors are harrassing you

By the time you are getting calls from collection agencies, you are usually several months behind on debts. An attorney can help you understand what debt collectors can and cannot do, to what extent you can negotiate with them, and at what point it is best to file for bankruptcy relief.

Middle: When you are sued

You have rights when you are sued. The vast majority of people who are sued by a debt collector do not know their rights, and in more than 80% of debt collection cases, the debtor does not even respond and judgment is entered by default. This does not have to be so, and you may have more rights than you think. An attorney can help you understand your rights to respond to the lawsuit, the time frames involved, and whether it will be worth it to hire an attorney to defend the lawsuit.

Middle: When you get the first foreclosure notice (notice of default)

When you receive a foreclosure notice, the clock is ticking, but many people do not know how long the clock will tick, what kinds of negotiations they can have with their bank to slow down the clock, or what bankruptcy will do at each stage. An attorney can help you understand these dynamics and how they apply to your situation.

Middle: When your creditor obtains a judgment

Most people allow judgments to enter against them by default. When a creditor obtains a judgment, there are some things the creditor can do and some things the creditor cannot do to collect money from you. An attorney can help you understand what remedies the creditor has, what the creditor must do to exercise those remedies, and what bankruptcy will do at each stage.

Middle: When you are served with a supplemental proceedings order

When a creditor obtains a judgment, the creditor can ask for supplemental proceedings to determine what asset you have. This is the one area of debt collection law where if you fail to appear, the creditor can get the court to issue a warrant for your arrest, for the sole purpose of forcing you to appear in court and divulge your assets. An attorney can help you understand these processes and also to understand whether and when to file bankruptcy and make these processes stop.

Late: When you have already hired an attorney to fight a lawsuit

Once you start actually paying money out of pocket, such as paying an attorney to fight a collections lawsuit, you should have already considered the question of whether you will file bankruptcy instead of paying that money. If you have not considered it yet, talk to an attorney about bankruptcy and get informed.

Late: When your employer garnishes your first paycheck

Garnishing paychecks is the most popular means of collection for creditors because it is simple and less costly than other means. Once a creditor starts seizing money from your paycheck, you should have already considered the question of whether you will file bankruptcy instead of paying that money. If you have not considered it yet, talk to an attorney about bankruptcy and get informed.

Late: When your bank account is frozen by a garnishment

Garnishing bank accounts is another popular means of collection for creditors. As long as there is money in the account, it can be very effective. Once a creditor starts seizing money from your bank account and you suddenly cannot use your accounts until the garnishment is resolved, you should have already considered the question of whether you will file bankruptcy instead of paying that money. If you have not considered it yet, talk to an attorney about bankruptcy and get informed.

Late: When a foreclosure sale is scheduled

There are several stages to foreclosure; the last is the sale. If you want to keep the home, and a sale is scheduled, you need to see a bankruptcy attorney fast. If you do not want to keep the home, you may not be in such a hurry, and can treat a foreclosure sale like any other collections matter.

Late: When you are arrested for missing a supplemental proceeding

Missing a supplemental proceeding is something that you should avoid, but the fact is that some people miss these hearings and get warrants out for their arrest. Some have such difficulty making consequences become real to them that they do not call a bankruptcy attorney until after they have already been arrested on such a warrant. The ordinary advice at this stage is to post bail and file bankruptcy fast. If you are in this situation, call a bankruptcy attorney now.

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