Should I Wait To File Bankruptcy?

June 29, 2012

Most people wait too long to file a personal bankruptcy case. Delay can cause judgments, foreclosures, garnishments, bank seizures, and even cost you your job. The best advice is to speak to an experienced bankruptcy attorney early. The sooner you get help, the better your chances at achieving a better financial result.

In some cases delaying a bankruptcy filing can be more advantageous than filing right away. There may be temporary circumstances that cause complications in your case or may even disqualify you from filing bankruptcy. When your bankruptcy attorney identifies these circumstances, you may be advised to wait to file. Below are some common situations that may cause you to delay filing:

You Recently Moved
You must reside in a new state for two years before you can take advantage of your new state’s exemption laws. If your new state’s exemption laws will protect more property than your old state’s laws, you may want to delay your bankruptcy filing.

Your Income Recently Dropped
Bankruptcy debtors must take a means test to determine whether there is disposable income to pay unsecured creditors in a Chapter 13 repayment plan. The means test examines your last six months of income, and your income average for the past six months may be significantly higher than your current income. This is especially true if you have been recently unemployed, laid off, or received a one-time bonus. By waiting to file you can reduce your means test income and potentially avoid a large Chapter 13 monthly payment or qualify for Chapter 7.

Your Old Car Loan Is Too New
In a Chapter 13 bankruptcy case, a car debt can be reduced to the vehicle’s fair market value. You only pay what your car is worth and the rest is paid at the same rate as other unsecured debts (usually little or nothing). However, this is only available for vehicles that were purchased more than 910 days before the bankruptcy filing. It may make sense to postpone your bankruptcy filing if you are close to the 910 day period in order to qualify for this advantage.

You Need To Discharge Taxes
The general rule on discharging tax debts is that the debt must be at least three years old. There are other timing restrictions, so consult with your attorney to see if you are close to qualifying for a tax debt discharge through bankruptcy.

You Expect A Large Tax Refund
An expected income tax refund is property of the bankruptcy estate. The Chapter 7 trustee can take the non-exempt portion of a large tax refund and pay unsecured creditors. It is often prudent to delay filing in order to receive and dispose of the refund in order to protect it.

Early consultation with an experienced bankruptcy attorney can save you many financial headaches. Your attorney can identify any trouble spots, and advise you in planning your bankruptcy case. If you are experiencing financial difficulty, speak with an attorney and discover how the federal bankruptcy code can help you get a fresh start.
 

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