Pamela Foohey, an educator in the School of Law, conversed with CBS News regarding the optimal moment 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 will seek bankruptcy protection solely after exhausting retirement savings and other properties that could have been safeguarded from creditors by pursuing debt relief. According to specialists, accessing retirement funds or borrowing money to address expenses is viewed as a warning sign.
“It is logical to file if a creditor is poised to seize something essential to you,” noted Foohey. “If an individual is experiencing wage garnishment that disrupts their life, or if a lender is threatening to reclaim your vehicle. If there is no alternative to acquire a car that suits your finances, filing may be a means to retain your vehicle or maintain your home.”
Individuals should consider their employment status and any health emergencies when contemplating bankruptcy.
“If you have lost your job, wait to file until after you secure new employment; if you encounter a health emergency, wait until you have recovered to clear all of the medical debts you’ve accumulated,” advised Foohey.
Should someone’s familial circumstances change, such as through divorce or the arrival of twins, she suggests that they first assess how they will manage their budget moving forward after the debts have been erased.
Personal bankruptcy submissions averaged around 750,000 annually prior to the COVID-19 outbreak but saw a significant decline during the pandemic due to government assistance. Currently, experts anticipate a resurgence to levels seen before COVID.
“We are still quite distant from the filing figures of 2019,” Foohey observed. “There was a substantial decrease during the pandemic that persisted for multiple years, which is now beginning to return to pre-pandemic figures.”
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