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When is the time to file for bankruptcy?

On Behalf of | Feb 2, 2023 | Bankruptcy

Bankruptcy is not an attractive option, but there are times when it is the best available choice. There were 383,810 annual bankruptcy filings in this country in Sept. 2022 which is a drop from the 434,540 filings in 2021.

When to file

Filing for Chapter 13 bankruptcy or other relief, such as Chapter 7, should be considered only when there is no other way out of overwhelming debt and after debt consolidation negotiations with creditors, or other options are unworkable. The goal of bankruptcy is to control your debt and keep creditors at bay.

These are typically good reasons to consider bankruptcy.

  • Facing foreclosure or property repossession
  • Overwhelming high interest credit card debt
  • Excessive medical bills
  • Undergoing a divorce
  • Having a serious illness


Bankruptcy harms credit scores. But this usually occurs after you already acquired long-term debt and collections.

In the short term, credit scores drop. Interest rates will rise on vehicle loans and other types of credit.

Federal and state bankruptcy laws exempt assets such as your home, wages, and retirement funds from creditor legal actions. Bankruptcy laws are intended to help debtors with financial difficulties and provide a fresh start. Chapter 13, for example, helps debtors keep their assets and make missed payments over three to five years.

Getting back

There are ways to rebuild your credit score and finances after you file for bankruptcy. It usually takes 18 to 24 months to rebuild credit.

Review your credit report and monitor your credit score so you can prepare for potential problems and focus on improving your score. Consider debt consolidation if your finances are not keeping up with your expenses.

Engage in good habits such as making regular and on-time payments, and by not overextending credit. Build up from borrowing small amounts of money.

A secured credit card allows establishment of a positive payment history. Holders place a cash deposit which is usually to the card’s credit limit and serves as collateral. Using and making on-time payments which are reported to credit bureaus can improve your credit score. Secured credit cards also provide a low credit utilization ratio which is a positive sign of creditworthiness.

Consider adding a co-signer to a loan when your credit score is not high enough. However, co-signers are liable for the loan if you stop payments, and this will also impact your credit score.


Kingcade & Garcia | A Miami Law Firm