How Timing May Affect Your Bankruptcy Filing

Getting the most out of your bankruptcy filing can depend a great deal upon the timing. In some cases a delay could be in your best interests, while in other cases you should probably file immediately. The laws of your specific state will have a huge bearing on what property will be considered exempt, and in most cases you must have lived in a particular state for at least two years prior to filing for bankruptcy.  If you have moved within the past two years, then the state exemptions which will apply to your bankruptcy case will likely depend on where you lived for the majority of six months prior to the two-year  period before filing for bankruptcy. Although this sounds confusing, the bottom line is that if you would be able to claim more exemptions in your “old” state, then you should file before you have resided in your “new” state for very many months.

Foreclosure or Repossession

Should you be facing either foreclosure of your home or repossession of your vehicle, you might consider filing for bankruptcy immediately in order to halt the process, hopefully saving your property. Generally an automatic stay will prohibit your creditors from continuing to engage in collection tactics, meaning they will be unable to sell your home or take your car without express permission from the courts. While Chapter 7 bankruptcy may only provide minimal and temporary relief, filing a Chapter 13 bankruptcy could allow you to catch up on your missed payments through a court-ordered repayment plan. In either case, you will only be helped if you file quickly enough to halt these adverse proceedings. Under Chapter 13 bankruptcy you might even be able to get your car back once it has been repossessed providing it has not yet been auctioned. Once an asset is sold, however, it is gone for good, so if your sale date is approaching, you will likely need to file your bankruptcy petition sooner rather than later.

Are You Being Sued?

The mere fact that someone is suing you doesn’t necessarily mean you should run out and file for bankruptcy, even considering the fact that a lawsuit will likely cost you a considerable amount of money. Choosing to do nothing could result in a default judgment against you meaning the creditor could potentially garnish your wages or place liens on your assets. Since filing for bankruptcy may halt the majority of legal proceedings against you, it doesn’t automatically get rid of property liens. If you wait to file for bankruptcy until the lien has been filed, you will be forced to do additional work later to attempt to have the lien removed and in some cases it will not be possible at all. Although you should definitely discuss the details of your potential bankruptcy filing with a qualified attorney, if you are being sued you should likely file sooner rather than later.

You Recently Had a Substantial Decrease in Income

Your eligibility for Chapter 7 bankruptcy or the ultimate amount you will pay creditors each month in a Chapter 13 bankruptcy are based on your average monthly income for a six-month period prior to your filing date. For this reason, if you’ve recently been laid off, or had any sort of income reduction, then you might want to consider waiting a few months to see if you will qualify for Chapter 7.  Since bankruptcy only eliminates any debts which exist at the time you file so if you believe you will be incurring considerable more debt, such as medical expenses, in the near future, you might choose to delay the bankruptcy until all your bills have come in.

Tax Refunds

If you expect a large tax refund, be aware it will be considered estate property even if you don’t have it in your bank account yet. Therefore, unless you are able to exempt your anticipated tax refund, a bankruptcy trustee may be able to take your refund and pass it around to your creditors. If you wait to file bankruptcy until you actually have the refund in hand, then spend it only on necessities for yourself or your family, the trustee will be unable to take the appropriate the refund. There are many more instances in which you might want to either file sooner or later, and the only way you can know this is to speak with a knowledgeable bankruptcy attorney who can help you make the best decisions for your unique situation.