The importance of when you file for bankruptcyby Glenn Kantor (Kantor Law Group)
For most people, deciding to file for bankruptcy is not easy. The decision is often made after consulting with an experienced bankruptcy attorney who will advise and counsel you regarding important factors that must be taken into account. Timing – or the decision about when to file – is an important factor that must be considered. A well-timed bankruptcy filing can save you a considerable amount of money and might even allow you to retain property that might otherwise be lost.
There are times when it makes sense to file for bankruptcy right away; and there are times when a delay in filing will work to your advantage.
A delay in bankruptcy filing may be warranted in circumstances such as the following:
* You recently experienced a significant decrease in income. Since the required bankruptcy Means Test examines your average monthly income for the six-month period immediately prior to your bankruptcy filing, the loss of a higher paying job or a reduction in income would reduce your six-month income average. This would allow you to make lower payments to unsecured creditors in a Chapter 13 bankruptcy or even qualify for a complete discharge of all or most unsecured debt in a Chapter 7 bankruptcy case.
* You recently accumulated more debt than you previously had. Bankruptcy laws prevent certain debts from being discharged in a Chapter 7 case and prevent certain debts from being re-paid at a reduced rate in a Chapter 13 case if those debts are incurred within a certain time period prior to filing. The applicable time period is often ninety days. Choosing to delay your bankruptcy filing might work to your advantage in cases where the debts you incurred were too recent in time.
* You recently paid back a debt to family or friends. Bankruptcy laws will likely consider the repayment of debt to family, friends or other preferred creditors to be preferential transfers. A payment or transfer is considered preferential if made within ninety days prior to your bankruptcy filing or within one year if made to a friend or family member. The existence of such a preferential transfer will enable the bankruptcy trustee to recover that money for the benefit of all your creditors and not just the party to whom you made the payment.
* Your bank balance is more than the amount that you are entitled to keep. In accordance with the federal or state exemptions that apply to your circumstances, you are entitled to protect only a certain amount of money. If you wait to file your bankruptcy and spend the money on necessities for you and your family, there will be little or nothing available for payment to your creditors by the time of your bankruptcy filing. However, whether you then qualify for a complete discharge of unsecured debt will depend largely on the Means Test calculation that examines your income for the six-month period prior to filing, as well as the exemptions applicable to other assets that you might have.
There are times when a bankruptcy filing should be done without delay, such as the following:
* You are facing the repossession of your vehicle or the loss of your home. The timely filing of a bankruptcy case can put a stop to foreclosure or repossession and allow you to begin the process of saving your house or car. Upon filing bankruptcy, the automatic stay immediately stops the process and prevents your creditors from continuing their collection efforts. If you file a Chapter 13 bankruptcy, you may be able to save your home or vehicle by catching-up on your delinquent payments by way of a court-approved repayment plan.
* You are facing a lawsuit and the possible entry of a judgment against you. The timely filing of a bankruptcy case will likewise stop the lawsuit and prevent the entry of a judgment against you. Rather than subject yourself to wage garnishment and liens against your property, a properly timed bankruptcy filing can result in either a Chapter 7 discharge of the entire debt or the possibility of a much-reduced payment in the event of a Chapter 13 bankruptcy case. A bankruptcy discharge does not, however, automatically eliminate liens previously placed on your property. Your attorney will advise you about the possible methods available to remove such liens.
If you have questions concerning the best time for you to personally file for bankruptcy and begin your path to a “fresh start”, please contact New York attorney Glenn L. Kantor at Kantor Law Group today.