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Scura, Wigfield, Heyer, Stevens & Cammarota Blog

Best Time to File Personal Bankruptcy: When Should I File?

[fa icon="clock-o"] April 1, 2014 [fa icon="user"] Scura Law Firm [fa icon="folder-open'] Bankruptcy

calendar with date circledTiming the Exact Filing of the Bankruptcy Is an Important Decision

Many times there is an immediate legal problem that requires the filing of a bankruptcy petition, such as a wage garnishment, foreclosure, sheriff sale, judgment lien on your home, or car repossession. These problems may force you to file right away, and could leave you with a bankruptcy filing fee. There are, however, many reasons why delaying the filing of a bankruptcy petition may make sense.

Income Too High Within the Last Six Months So You Should Delay the Bankruptcy Filing

For determining median income level, the bankruptcy court looks at your last six months income and multiplies by two or annualizes that income. If you are over the median income level you may be ineligible for a Chapter 7 bankruptcy and be forced to file a Chapter 13 bankruptcy. In a Chapter 13, you will be forced to pay at least a portion of your debts while in a Chapter 7 you will not. Thus, if your income was higher over the last six months but has gone down you may want to wait until that income has been at a reduced level to ensure that you are under the median income level before filing so that you are eligible for a Chapter 7.

For Example, say your income has dipped recently because of a pay cut or layoff, you can often become eligible for Chapter 7 bankruptcy by simply waiting a couple months. Waiting this short time period may make your income over the last six months low enough to qualify for a Chapter 7.

Waiting to Make Sure You Do Not Lose Non-Exempt Property

You cannot hide assets before you file bankruptcy. However, you may have some assets that are slightly over your allowable exemptions. For instance, you may have $14,000 in the bank and since you are only allowed an approximate $10,100 wild card exemption, a portion of that money may be taken by the bankruptcy trustee. There is nothing wrong with waiting and spending some of that money on legitimate expenses. Just keep track of all expenditures. Once the amount of money has gone below your allowable exemption, then file the bankruptcy. Just make sure to speak to a qualified bankruptcy attorney so that you do not do anything that could be argued is bad faith.

If You Anticipate Having New Debts Soon You May Want to Delay the Bankruptcy Filing

If you anticipate having high expenses in the near future, you may be better off waiting to file the bankruptcy. For example, we recently had a client with no medical insurance. She was pregnant with a high risk pregnancy. We waited until after she had the baby in order to make sure that any medical debt that was incurred and not paid for could be wiped out in the Chapter 7 bankruptcy. You never want to incur debt purposely with the intention of wiping it out but there are certain situations where waiting to file because of problems that are known will come up makes sense.

If You Know that You Will Inherit Assets You May Want to Delay or Not File the Bankruptcy

If you are the beneficiary of an estate of a person that has died or is about to die, you may want to consider seriously delaying the filing of a bankruptcy or not filing at all. If the assets you will receive are substantial, a trustee will be able to take those assets, sell them and give the money to creditors. You should meet with a lawyer and go through the timing of the bankruptcy and if you should file at all if the assets you will receive are too large.

Recent Transfer or Property May Present a Problem

Depending upon where you live, if you transferred property recently, there are statutory time periods that a trustee can look back and undo such transfers. You have to be sure of the laws in your State as to how long a trustee can look back. Making sure that you file the bankruptcy at the wrong time may cancel out that transfer or may cause your bankruptcy to be dismissed.

Recent Charges on Credit Cards

When you charge more than $550 in luxury goods or services on any one credit card within 90 days of filing for bankruptcy, there is a presumption under the Bankruptcy Code that the charges are fraudulent. These charges could survive your bankruptcy if the creditor files a complaint objecting to their being wiped out. The simple solution could be waiting past that 90 day period to file the bankruptcy if you did happen to make recent charges.

You May Want to Wait to File Bankruptcy until After You Have Obtained Your Loan Modification

A difficult issue arising more and more is the loan modification. There is many times no correct answer but it may make sense, if you can wait, to delay the bankruptcy filing until the loan modification is finalized. Once you file for bankruptcy, some lenders will refuse to enter into or continue negotiations over your mortgage. Because of the bankruptcy filing, the lenders may transfer the loan to the bankruptcy department and it delays or stops the negotiation on the loan modification. Many times, clients are already in the middle of a foreclosure so waiting on the loan modification is not an option.

The timing of the filing of the personal bankruptcy should be discussed in detail with your bankruptcy attorney. Contact a New Jersey bankruptcy attorney in one of our New Jersey offices to discuss your potential bankruptcy filing, and the possibility of a bankruptcy filing fee.