Hi. Matt McArthur, attorney at Clear Counsel Law Group.
Today, I want to talk a little bit about whether or not it's necessary to become delinquent or to default on your monthly payments, on your debts, in order to be able to file for bankruptcy.
The simple answer is no, delinquency is not necessary.
We meet with people on a regular basis here and one of the common comments that we come across is:
"You know, I'm up-to-date on all my payments. I haven't missed anything yet. I'm barely squeaking by...I'm making minimum payments on my credit cards or other bills but I just can't keep it up. Do I have to miss payments before I can start the bankruptcy or can I be proactive and just move forward with filing the bankruptcy now since I know I'm not going to be able to keep it up for very long?"
It's simply not necessary and I'm not sure where the idea came from because it's quite common question that we come across.
Delinquent Payments, Bankruptcy, and Short Sales
I think it may have some roots in the fact that many people considering a short sale won't be considered for short sale by their mortgage lender unless they have become delinquent on their mortgage payments first but that does not apply a bankruptcy.
You are able to file bankruptcy even if you are up-to-date on all of your payments and you have a perfect credit record.
The advantage of filing for bankruptcy when you are actually current on your bills is that you're not going to create a long period of time of delinquency that's going to still show on your credit report after the bankruptcy has been completed.
When we look at your credit report, one of the factors that determines what your current score is going to be is based upon your payment history.
By intentionally defaulting on bills prior to filing bankruptcy for really no need at all, that's only going to drag down your credit score in a post-bankruptcy setting.
I wouldn't recommend defaulting solely for the purpose of filing bankruptcy.
If you have any further questions related to this matter, please come in and visit with me, Matt McArthur, bankruptcy attorney here at Clear Counsel Law Group.
I hope to hear from you soon.