A person can fall into debt for any number of reasons. A sudden medical expense, for example, can quickly wipe out a consumer's savings and leave him or her in a great deal of financial trouble. A lost job can also force a person to default on their loans, and perhaps lead to bankruptcy. Sometimes, personal bankruptcy is simply the result of poor money management.
Whatever the reason, experts say consumers should keep the possibility of bankruptcy in the forefront of their minds while they are dealing with their debt problems. When a person's financial situation becomes untenable, and it becomes clear that the consumer will not be able to keep up with financial obligations, there is a tendency for consumers to simply give up and stop trying to pay the bills at all.
Often, this is due to the social stigma that some people still attach to personal bankruptcy. Consumers simply don't want to admit that they have fallen behind on their financial obligations, so they never declare bankruptcy. In this situation, one's financial situation goes from bad to worse as late fees pile up and creditors begin calling.
In many cases, then, it's better to file sooner rather than later. The end result will likely be the same, and the sooner one files bankruptcy, the sooner one can get one's financial life back on track. Furthermore, waiting to declare bankruptcy gives creditors the opportunity to file a lawsuit to garnish a consumer's wages. Declaring bankruptcy would make it clear to the creditor that one is truly unable to pay, and it would allow one to make preparations for a legal repayment arrangement through the bankruptcy system.
Source: CNBC, "The good thing about bankruptcy" Sakina Spruell, Oct. 21, 2013