Spring is a season of new beginnings and hope for the future. For many people, this same feeling of hope carries over into their finances. Perhaps that is one reason why personal bankruptcy filings tend to spike in spring.
Debt is a common struggle for many individuals. Although it is sometimes difficult to consider bankruptcy as an option, in many cases, bankruptcy really is the best choice. This is particularly true for those who are not making progress on erasing debt. Just as spring offers nature a fresh start, bankruptcy can offer people in debt a fresh financial start that gives them hope for the future. Instead of interest payments, money can go toward retirement, saving for college and other productive uses.
NerdWallet recently analyzed bankruptcy filings in March and April for the last four years. As expected, Chapter 7 bankruptcy filings were up as much as 34 percent and 25 percent for those two months, respectively.& ;
Many use a tax refund to get out of debt – through bankruptcy.
Another reason for the increase in filings in spring is that people tend to use their tax refund to file Chapter 7 or Chapter 13 bankruptcy. While bankruptcy is often the cheapest way to get out from debt, bankruptcy does have some associated costs. Instead of putting tax refund money toward a one-time payment, many take the opportunity to get out from unmanageable debt permanently by filing bankruptcy.
The typical tax refund for the years studied was enough to cover a Chapter 7 filing in full, according to IRS data.
Chapter 7 and Chapter 13 bankruptcies
While the increase in filings is typically associated with Chapter 7 “liquidation” bankruptcy, the spring months are also a common time to file for Chapter 13. Chapter 13 bankruptcy is a debt reorganization bankruptcy, in which debts are consolidated into manageable monthly payments. In Chapter 7, however, some of your property is sold. The amount is then distributed to creditors, with your remaining debt discharged (eliminated). It is worth noting that bankruptcy does not mean you will lose all of your possessions; the bankruptcy code exempts some property from being sold to creditors.
Bankruptcy is not as scary as you may think.
It is understandable that you might be hesitant to consider bankruptcy. However, when done correctly, bankruptcy can be the safest and most financially responsible option. Rather than falling behind on essential payments or avoiding helping yourself save for retirement, you and your family can begin again with a financial plan that gets you back on track.& ;
New beginnings are the essence of spring. Therefore, if you are in severe debt, this season may be the perfect time for you to consider filing bankruptcy. You should speak to a bankruptcy attorney to discuss your individual circumstances and financial goals to determine the right course for you.