Most of the time, when a client comes into my office to talk about filing bankruptcy, they have urgency to file. We can usually point to a single event that has caused them to seek out legal advice. Perhaps they received notice of a foreclosure sale, their car has been repossessed, or creditors are hounding them. Whatever the reason may be, people usually don’t meet with a bankruptcy attorney unless something has motivated them to seek out help.
Every once in a while someone will come into my office to talk about bankruptcy, and they do not have a feeling of urgency. People with high incomes tend to wait the longest to make a decision to file bankruptcy, and this delay can be very costly. Debtors in Chapter 13 bankruptcy repay somewhere between 0% and 100% of their unsecured debt. How much they have to pay to unsecured creditors usually depends on how much they earn. The more a person earns, the more they have to pay back. Debtors with large incomes often have to pay back 100% of their debt. So you may be asking yourself, why should someone who has a high income and will have to pay back all of their debt, be in a hurry to file bankruptcy? Because the longer a high income debtor waits to file bankruptcy, the more they will eventually pay. Debts grow due to interest, fees, and costs of collection activities. For example, a credit card with a balance of $100,000 earning 30% interest will double in approximately two and a half years. If a high income debtor with $100,000 in credit card debt files bankruptcy today, they may have to pay back $100,000 to their unsecured creditors, but if they wait two and half years they may have to pay back $200,000. For high income debtors, waiting to file bankruptcy can cost tens of thousands of dollars.