Timing A Bankruptcy
A case could be made that there is no “good” time for bankruptcy in a person’s life. However, we all know that life is messy and that finances can sometimes be a hardship. While a bankruptcy is not the end of the world, there are some timing considerations to take into account when you have finally decided that bankruptcy is the choice you are making to start fresh. Sometimes it makes sense to file for bankruptcy immediately, while other times it may be more advantageous to wait or delay filing. Let’s look at how Timing a Bankruptcy is critical to your financial health.
Reasons to File Immediately –
- Do you urgently need an automatic stay to stop collection and repossession activities, utility shut-offs and any state court proceedings against you? If so, filing immediately may be the best course of action.
- Are you about to come into property after the filing date? (A vacation home, or valuables, or collectibles) Filing immediately protects it from the reach of creditors because it isn’t in your possession at the time you file, except for an inheritance which if it occurs within one hundred eighty (180) days of your filing date, becomes part of your bankruptcy estate.
- Foreclosure or Eviction – If you are fearful of losing your home or apartment and want to stop the eviction or foreclosure process, filing in a timely manner can put a hold on those processes.
- Wage Garnishment – Usually this is the last straw for people considering bankruptcy. A bankruptcy filing will stop wage garnishment immediately. If you are facing a wage garnishment it is important to file the case quickly so that you don’t risk losing those funds.
Benefits to Delaying
- Tax Refund – If you are expecting a tax refund you may want to delay to use that refund for necessities before filing for bankruptcy. If you receive the refund after you file, you may need to surrender it to the trustee if you are unable to exempt it. So, if you are filing close to tax season, consider this step carefully and how important any refund may be for you and your family.
- Property – Do you have items that you are hoping to sell to use the proceeds? Delaying may help you have a little extra time to sell those items.
- Incurring more debt in the future – If you know that more debt is coming, like medical bills, you may want to wait a bit so that it too can be wrapped into this bankruptcy filing. It may also make qualifying for the means test easier.
- Recently Moved – If you know you are moving and can take advantage of that state’s bankruptcy laws then wait until the move is complete.
- Friends and Family as Creditors – If you are hoping to pay off friends and relatives that may have lent you money, you may want to hold off until you have done so before the trustee decides upon the bankruptcy or repayment plan. Just make sure to wait long enough so the trustee can’t set aside the payments.