David M. Siegel answers in 34 seconds. Watch on YouTube · Read the transcript.
Short answer: No. You can file while completely current on every account. Being up to date does not mean you are in good shape — if every spare dollar goes to servicing credit cards and personal loans, you are running in place. You can file while current and either eliminate that debt under Chapter 7 or reorganize it under Chapter 13.
Current is not the same as fine
People assume bankruptcy is for those who have already defaulted, so if they have never missed a payment they must not qualify. That is not how it works, and the assumption keeps responsible people struggling for years longer than necessary.
The relevant question is not whether you are behind. It is what being current is costing you — and whether the balances are actually going down.
Running in place
Here is the pattern we see constantly. Someone has never missed a payment in fifteen years. They make every minimum on time. And the total they owe is the same as it was three years ago, because the minimums are structured so that most of each payment is interest.
They are not failing. They are paying a large sum every month for the privilege of staying exactly where they are. Nothing about being current changes the fact that the debt is not going anywhere.
What it costs to keep going
That money has to come from somewhere, and usually it comes from the things that build a life — retirement contributions, savings, repairs deferred, a vacation not taken, a child’s activity skipped.
The more damaging version is people cashing out retirement accounts to stay current on credit cards. Retirement funds are protected in bankruptcy. Spending protected money to service debt that could have been discharged is the single most expensive mistake in this area.
Filing early can go better
Filing while current sometimes produces a cleaner case. There are no judgments to unwind, no garnishment to stop, no liens attached to the house, and no pressure from a sale date on a calendar.
You are also making the decision with a clear head rather than in a crisis. Both chapters are available and there is time to choose properly between them.
Current on everything and still going nowhere?
The consultation is free and there is no obligation. You will find out what you qualify for, which debts can be eliminated, what it costs, and what the payment plan looks like.
Wheeling: (847) 520-8100 Chicago: (773) 276-6969
Your case is handled by phone — you do not need to come into either office. Even the meeting of creditors is held on Zoom. We represent clients across the Northern District of Illinois: Cook, DuPage, Grundy, Kane, Kendall, Lake, LaSalle and Will counties.
Full transcript of the video
do I have to be behind on my bills to file for bankruptcy the answer is no in fact just cause you’re up to date on your debt doesn’t mean you are in a good situation you might be putting all of your disposable income towards your debt servicing for credit cards and personal loans and what not so you don’t have to be behind you can file a bankruptcy even though you’re current and eliminate the debt or reorganize the debt under Chapter 13 couple different chapters apply really depends on your situation consult with an attorney to find out which chapter is best for you and how it all works
Related questions
- How much debt do you need to file?
- Chapter 7 vs Chapter 13: what is the difference?
- Should I wait to file?
About the author. David M. Siegel has represented consumer bankruptcy clients in the Northern District of Illinois since 1991 and is the author of several books on consumer bankruptcy. The firm has offices at 790 Chaddick Drive, Wheeling, IL 60090 and 10540 S. Western Ave, Suite 202, Chicago, IL 60643, and handles cases by phone for clients throughout the Chicago area.
This article is general information about Illinois and federal bankruptcy law. It is not legal advice, and reading it does not create an attorney-client relationship. Every case turns on its own facts — speak with an attorney about yours.