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

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

While this may seem counter-initiative coming from a bankruptcy attorney, there are times when it’s actually in your best interest to wait or delay filing for bankruptcy. Knowing these situations beforehand helps you understand how to better time your filing and ensure the best possible outcome.

When You Should Delay Filing for Bankruptcy

  • If you have an opportunity to work with your mortgage lender.  While filing for bankruptcy can delay property foreclosures, some people file too soon before they have a definite foreclosure date. The bankruptcy court has a mortgage modification program. Other than stopping a foreclosure, the bankruptcy program offers no greater benefits than you could achieve directly with the lender.
  • If your recent income has been high, but has decreased. When determining which type of bankruptcy (Chapter 7 or Chapter 13) you’re eligible to file, the courts review your income over the past 6 months. Wanting to file may be an option. However, the courts have recognized that definite reduction of income may allow a filing without having to “play the waiting game”.
  • If you’ve incurred new, unnecessary debt or transferred property. If you’ve done any of the following, waiting to file for bankruptcy minimizes the chance these debts will survive your bankruptcy.
    • Credit card charges – If you charge more than $650.00 on luxury goods or services on any one credit card within 90 days of filing for bankruptcy, the court may decide you made the charges fraudulently without any intent of repayment. In this case, the charges would not be wiped out and you would be required to pay them.
    • Cash advances – If you take out cash advances totaling $925.00 or more on any one credit card within 70 days of bankruptcy filing, these advances can be considered fraudulent and again, you would be required to pay them.
    • Payments – If you pay more than $600.00 to a commercial creditor within 90 days or a relative or business associate within a year of filing for bankruptcy, the bankruptcy trustee can take the money back (also known as recapturing) and redistribute it among other creditors.
    • Transferring property – If you’ve transferred property by either giving it away or selling it for less than market value within the past two years, the bankruptcy trustee can recapture the money and redistribute it to other creditors.
  • If you’ve filed multiple bankruptcies. If you’ve filed for bankruptcy in the past, you’ll need to wait before you can erase (discharge) additional debt.
    • If you filed Chapter 7 bankruptcy – Need to wait 8 years after original filing date.
    • If you filed Chapter 13 bankruptcy – Need to wait 4 years after original filing date.

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