Should you file for bankruptcy before you miss any payments?

Sometimes, life presents hardships without any warning. Other times, you may be lucky enough to know when trouble is coming your way. For example, if your boss notifies you of an impending lay-off or termination, you may immediately know you’re in trouble. 

Many people wonder if they can proactively file for bankruptcy before defaulting on debt. Fortunately, there are no laws requiring you to be in default to file for bankruptcy.

Do you qualify?

Strangely, bankruptcy eligibility has less to do with your debt than your income. Virtually anyone can file for bankruptcy so long as they meet the requirements.

For most Chapter 7 bankruptcies, filers must pass the means test (among other requisites) to prove they qualify. You may automatically qualify if you earn less than or equal to your state median wage. In 2023, the Alabama median wage is $52,035. However, you may be eligible even if you earn more.

The requirements for a Chapter 13 bankruptcy are typically less strict than the Chapter 7 requirements. Once you have determined you are eligible, you must decide whether to file right now or wait until you default on your financial obligations.

Which approach is best?

As you may expect, it depends on your unique circumstances. One possible risk of filing before you default is the court may not think you tried to resolve your financial issues before seeking bankruptcy. Courts typically require consumers to do all they can to address debt before resorting to bankruptcy.

On the other hand, if you have exhausted every resource and can prove you are about to experience insurmountable debt hardships, an early filing may succeed. Generally, legal guidance can help you determine what debt resolution steps to take and when to take them.

Attorney Brad Hawley

Attorney Brad HawleyAttorney Brad Hawley possesses years of practical experience focused on bankruptcy, civil and criminal defense. He has prosecuted and defended clients in state court, and is a former enlisted member of the United States Army. Brad is driven by his desire to help people that have been hurt by the legal system, and is dedicated to fixing injustices he sees around him. [ Attorney Bio ]

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