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Study suggests delaying bankruptcy could increase struggles

It's only natural for people to want to put off filing for bankruptcy, mainly because it's often seen as a sign of failure or viewed as something meant to be a last resort. However, a law review study suggests that the longer individuals wait to file bankruptcy, the more their personal and financial well-being may be affected. What this could mean for debtors in Louisiana considering bankruptcy is more of a struggle with getting a fresh start.

The period before the decision to file for chapter 13 bankruptcy is made is referred to as "the financial sweatbox." This is typically the period when debt continues to accumulate and creditors make collection attempts and threaten legal action. Based on data from more than 3,000 bankruptcy cases, the study notes that more than a third of individuals evaluated waited five years or more to file.

Long-term debt strugglers, according to the study, are more likely to have fewer median assets available, have a higher median debt-to-income ratio and face debt collection lawsuits. Emerging from bankruptcy with less in the bank can make it difficult to gain a solid footing again according to one of the study's authors. It's generally recommended that individuals consider seeking legal protection from creditors when debts are more than 40 percent of total income, other debt is being used to pay off debt and essentials like medical care are being sacrificed.

A bankruptcy lawyer may provide further guidance when a debtor is considering chapter 13 bankruptcy. An attorney may take steps such as determining if the debt owed would likely be wiped out following bankruptcy. Unsecured consumer debts such as medical bills, credit card obligations and personal loans might be discharged.

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