Do you struggle financially? Have you considered filing bankruptcy but keep delaying because you feel a need to “make good” on your debts or you fear potential damage to your credit?

According to a recent study, the longer you wait to file bankruptcy, the more you could damage to your financial future.

Life in the “Sweatbox”

The Consumer Bankruptcy Project (CBP) is a long-term academic research project that studies those who file bankruptcy, why they file and the consequences. The CBP’s report “Life in the Sweatbox” collected data from 3,200 bankruptcy cases between 2013 and 2016. The report showed that many chose to struggle in the “financial sweatbox” before filing bankruptcy.

According to their findings, over 66% endured the sweatbox for two years or more while almost a third waited five years or more before filing bankruptcy. During this time in the sweatbox, the report says these consumers or “long strugglers” took drastic measures to meet their debts such as:

  • Taking out new loans
  • Going without food, utilities, or medical care
  • Selling personal property such as furniture, jewelry, electronics, etc.
  • Liquidating or borrowing against retirement accounts or insurance policies

Sadly, the report shows that many of the long strugglers’ sacrifices only ended up making their financial situation worse. The report says many lost their homes to foreclosure and vehicles to repossession.

When compared to those who didn’t wait two or more years to file bankruptcy:

  • Long strugglers had half the median assets by the time they filed bankruptcy
  • Long strugglers’ median debt-to-income ratio was over 40% higher
  • Almost half of the long strugglers had debt collection lawsuits by the time they filed bankruptcy, compared to 35% of those who filed earlier

According to the report, “the longer people struggle to pay their debts before they file bankruptcy, the more assets they lose or sell and the more debt they incur. Some of this debt may be non-dischargeable, leaving them with less of a fresh start post-discharge.”

Ultimately, the CBP report showed that making bankruptcy the last resort to fixing your financial troubles is not wise. You could do yourself more harm than good. If you want to see if a bankruptcy could be your financial fresh start, contact us for a free evaluation of your financial situation.