30 May What Causes an Emergency Bankruptcy?
I wanted to write something about what makes those who procrastinate file bankruptcy. First of all, procrastination and bankruptcy often go hand in hand. The unknown is scary and making a move during a period of insecurity is hard. Bankruptcy often feels optional at the beginning: maybe that loan modification, family help, or creditor concession will come through and save the day. Even once a person knows they need to file, they often wait, paralyzed, until something truly forces their hand.
I figure this is all just human nature, and usually, when and if someone needs to file for bankruptcy, the waiting and hoping has not truly hurt them. Maybe it has caused a bit more credit damage, but no irreparable harm has been done. However, debt default has real consequences and events do come along to make even the most recalcitrant file for bankruptcy protection. Here are some:
1. Wage garnishment. This is a big one. Having your paycheck shrink on very short notice causes major shock and distress. This is an example of having waited too long and getting yourself into a tough spot. Bankruptcy will stop the garnishment, but the garnishment makes it harder to pay the fees to get into bankruptcy. Plus, a normal bankruptcy takes time to file, and this is in conflict with the next looming pay period and garnishment.
2. The Approaching Foreclosure: Sometimes this is just tragic because people wait too long. If a bankruptcy is filed on the eve of a foreclosure sale, it will still stop the sale. However, once the hammer falls and the memorandum of sale is signed, the foreclosure is final and cannot be reversed absent the rarest of circumstances.
3. The Arrest Warrant. In Massachusetts, it is common for procrastinators to be served with lawsuits and supplementary process summons. If a debtor ignores the latter, civil arrest warrants will follow. A sheriff will usually make telephone contact with the debtor to arrange voluntary attendance at the courthouse, but all the same, an arrest warrant is scary stuff. It makes people get serious and take action about handling their debt problems.
I want to stress something and dispel a misconception some have: A normal bankruptcy takes time to prepare. If you wait until the last minute, you will have an “emergency case”. Lawyers will charge you more money than they do for a normal case to put whatever they are doing on hold and take on your emergency–if they can take it on at all. My advice would be to not let things become an emergency before taking action.
Nicholas Ortiz, Boston Bankruptcy Attorney
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