When is the Best Time to File for Bankruptcy? – Part I

When is the Best Time to File for Bankruptcy? – Part I

Many of my clients wonder when the best time is for them to file for bankruptcy. Fortunately, it’s fairly easy to understand when you should file immediately for bankruptcy and when it makes more sense to wait.  Knowing these situations beforehand helps you understand how to wisely time your filing and ensure the best possible outcome.

When You Should File for Bankruptcy Right Away

  • If you are facing a lawsuit.  Filing for bankruptcy stops or at least delays most legal proceedings against you, which provides relief from creditors and decreases stress. In addition, filing right away prevents creditors from obtaining a lien on your property.  This saves you time that would be spent on removing the lien and from the risk of losing your property.
  • If your home is going into foreclosure. If your home is being foreclosed on and you’ve received a foreclosure complaint, filing for bankruptcy right away stops the foreclosure process and grants you an automatic stay. Remember, bankruptcy can only help you if you file before the sale date, which is why it’s important to file immediately. Once your property is sold, the automatic stay doesn’t apply because you no longer own the property.
  • If your car is about to be repossessed. Filing for bankruptcy stops the repossession process and grants you an automatic stay, but only if you file before the repossession date. This is why it’s important to file immediately.
  • If your wages are being garnished. The automatic stay stops wage garnishment – when money is deducted from your paycheck or bank accounts for creditor repayment.
  • If you are about to start or recently started a higher paying job. When determining which type of bankruptcy (Chapter 7 or Chapter 13) you’re eligible to file, the courts will review your average monthly income for the previous 6 months. Filing before or soon after your income increases means you may still be eligible to file for Chapter 7 bankruptcy.  However, the longer you wait to file, the more of your higher monthly income will be factored in, which may disqualify you from Chapter 7 bankruptcy.
  • If you are moving to a state with less favorable property exemptions.  The amount of property you can protect in bankruptcy depends on the exemption laws of your state. If you can exempt more of your assets using your former state’s exemption laws, then file for bankruptcy before you’ve lived in your new state for 2 years. If you don’t, you’ll be required to follow the new state’s property exemptions. Bankruptcy exemptions in New Jersey are much more serious than in other states.  

If you’d like assistance in deciding when filing for bankruptcy is best for you, please contact me to schedule an appointment.