Pamela Foohey, an academic at the School of Law, engaged with CBS News concerning the optimal time to initiate personal bankruptcy proceedings.
The negative perception and embarrassment that numerous Americans associate with bankruptcy lead individuals to resort to it only as a final option. Many individuals will resort to filing for bankruptcy solely after exhausting retirement savings and other properties that might have been protected from creditors by seeking debt forgiveness. Experts indicate that withdrawing from pensions or acquiring loans to manage expenses is viewed as a significant warning sign.
“It is logical to file if a creditor is capable of seizing something essential for you,” Foohey stated. “If someone is experiencing a wage garnishment detrimental to their life, or if a lender is on the verge of reclaiming your vehicle. When there’s no alternative to obtain a vehicle within your financial means, filing could serve as a method to retain your car or maintain your home.”
Individuals should consider their employment status and any medical emergencies when contemplating filing for bankruptcy.
“If you have been laid off, file after securing a new position; if you are facing a health emergency, file after recovery to clear all the medical debts you have accumulated,” Foohey advised.
In the event of a family situation changing, such as a separation or the arrival of twins, she suggests first determining how to financially navigate in the future on a budget post-debt discharge.
Annual averages for personal bankruptcy filings hover around 750,000 before the pandemic, but saw a significant decline during the pandemic owing to governmental assistance. Currently, experts anticipate a resurgence to the levels witnessed prior to COVID-19.
“We’re still significantly distant from the filing statistics of 2019,” Foohey remarked. “There was a considerable decrease at the onset of the pandemic that persisted for multiple years, which has now begun to revert to pre-pandemic figures.”
The article Professor discusses when to file for bankruptcy was first published on UGA Today.