How Much Does It Cost To Delay A Las Vegas Bankruptcy Filing By One Year?

It’s best not to be hasty when making important decisions that will impact your life for several years to come. A perfect example of this is declaring chapter 7 or chapter 13 bankruptcy. Drafting and filing a bankruptcy petition is no easy task, and it can take quite a while to do so after coming to a decision about how you want to address your debts. So if you’re still pondering your decision, or already know you want to file for bankruptcy and are simply putting it off, it could cost you dearly. If you have worked up a significant debt balance, it will become more expensive every day that you procrastinate a chapter 7 bankruptcy or chapter 13 bankruptcy filing. Read on for a discussion about how much it could cost to postpone a Las Vegas bankruptcy case by just 12 months, or one year. To take the plunge into bankruptcy as soon as possible, schedule your free phone consultation with our firm at 702-370-0155 for more information. 

Interest Costs

When you have accrued debt, you don’t just have that balance to repay—you will also need to account for interest and other potential fees added by your creditors. Get out of debt with the help of Vegas bankruptcy lawyers when interest could end up being all you can afford to pay if your debts are high enough. For example, let’s say you have amassed $30,000 in debt from credit cards and other sources. This debt likely has a high interest rate, somewhere around 29 percent. With this much debt, interest alone is several hundred dollars per month. Even if you paid $500 per month to pay off your debts, interest would increase your total debt by $3,700 to $33,700 in one year. Not only will your debt have grown, but you will have wasted $6,000 trying to pay off debt that would eventually be cleared in bankruptcy. That $6,000 could have been spent on your bankruptcy attorney’s fees and other bankruptcy costs, as well as several other purchases that could make your life more comfortable over the course of a year.

Wage Garnishment

There is little reason to delay a bankruptcy filing if your wages are being garnished. Wage garnishments automatically funnel a portion of your income to your creditor until their balance, plus fees and interest, has been paid in full. How much of your income can be garnished depends on the type of debt in question. For example, most debts are limited to garnishments of 25%, but a parent who owes back child support could have their wages garnished up to 65%. The median salary in Las Vegas, Nevada, is $60,465 per year. After taxes, take-home pay would be about $4,200 per month, which is when wages are garnished. So if someone making the median salary in Las Vegas had their wages garnished for a credit card or other standard debt, they would be losing about $1,050 each month to the garnishment. Here, someone whose wages are being garnished can ask the court to reduce their wage garnishment upon a showing of financial hardship. However, 15% is the absolute lowest point to which the court can reduce the garnishment. This is still about $630 per month being lost to a wage garnishment, which is probably still more than a person struggling with debt can afford. 

It is almost unheard of for a creditor with a wage garnishment in place to agree to an alternative payment agreement. They have no incentive to take that risk when they have already used resources to pursue a judgment and writ of garnishment, and the garnishment provides steady repayment. So, how can one stop a wage garnishment without paying the balance in full or dying? When the automatic stay from bankruptcy is in place, creditors must halt wage garnishments. The protection from the automatic stay lasts until the case is discharged or dismissed. If the case is dismissed, or the debt from which the wage garnishment originated isn’t cleared by the discharge, the creditor can resume a wage garnishment at this point. Additionally, only a fully-paid chapter 13 bankruptcy petition filing can stop a child support wage garnishment. But if the debt is cleared, the wage garnishment stops forever, and the debtor can enjoy the benefits of their full income. 

Retirement Withdrawals

Before turning to bankruptcy, many debtors try to get their debt situation under control by withdrawing from their retirement savings accounts. This is an undeniable waste if that person ends up filing for bankruptcy, especially because retirement savings are generally exempt from the process. This method is especially costly because if the person withdraws prematurely before retirement age, they will be penalized an additional 10%. On top of that, the debtor loses out on the interest the funds in that account would have generated instead of being spent to pay off debts. 

Numbers make it easier to demonstrate just how much a debtor can waste if they withdraw from retirement funds to avoid bankruptcy. Let’s use a person who withdraws $20,000 from their 401(k) or IRA to pay their debts. That person might pay $4,400 in taxes on their withdrawals if they have reached retirement age, or about $6,400 with the early withdrawal penalty if they have not yet reached retirement age. That $20,000 could have grown to $25,000 if left in the account, resulting in an additional $5,000 in lost growth on top of what was withdrawn from the account. 

Delayed Credit Benefits

How bankruptcy immediately impacts the debtor’s credit score is based on several factors, largely on how many accounts were current and in default. Whether credit rises, falls, or stays the same upon filing for bankruptcy, a debtor can take proactive steps to improve their credit history after discharge. These include using credit reporting, using secured credit cards, being added as an authorized user on another’s account, using a credit-builder loan, and more. But the debtor can’t start taking these steps until they have obtained a debt discharge. So the longer that person waits to file for bankruptcy, the more it could cost them. But it’s impossible to say how much that could be. For example, debtors must wait a certain number of years after bankruptcy to qualify for a home mortgage. If a person has debt but wants to buy a home, the sooner they file, the sooner that waiting period begins running, and they can use credit-building methods to improve their credit and get a better interest rate when they do qualify. 

Looking to Protect Yourself from Creditors and Save Thousands of Dollars in Debt? Start Your Bankruptcy Journey Today. 

Putting off a bankruptcy that you are going to file eventually anyway can cost you thousands upon thousands of dollars. It also extends how long you experience financial stress and delays in credit re-building. A bankruptcy attorney can review your situation to determine if it is worth pursuing alternatives, or if they will just be a waste of time and money before you file for bankruptcy. Want to learn more without spending a dime or leaving the home? Schedule your free consultation with an experienced Las Vegas bankruptcy lawyer today by calling 702-370-0155.