Filing for bankruptcy too soon can limit your ability to maximize debt relief
When it comes to filing for personal bankruptcy, timing is everything. You need to choose your timing wisely in order to maximize benefits and minimize forfeitures. The best way to pick the right time to file is to contact a bankruptcy attorney, but in the mean time you may want to consider these 6 reasons to delay filing.
Your Income Dropped Recently
If you have had a high paying job in the past 6 months and only recently gotten laid off or suffered a pay cut, this could affect your bankruptcy options. In order to discharge all of your unsecured debt in Chapter 7, you need to pass the California Means Test. Individuals who can’t pass the test due to high income will have no choice but to file Chapter 13, which requires them to repay a portion of their debts. By waiting a few months to file, you may be able to ensure that you pass the test and have the option to file for whichever type of bankruptcy will be best for you.
You Recently Made Non-Essential Purchases
If you have recently made any big purchases or taken any significant cash advances off your credit cards in the past 90 days, you may need to delay filing in order to prevent these transactions from being deemed fraudulent. Fraudulent transactions will not be included in the bankruptcy and may even jeopardize your ability to have your bankruptcy petition approved at all.
You Have Non-Exempt Assets You Wish to Protect
When filing for bankruptcy, only certain assets will be exempt from liquidation. If you currently have assets that do not qualify for exemption, you may wish to delay filing for bankruptcy. For example, if you have a tax refund coming, you may wish to wait until you have received and spent that refund before filing for bankruptcy. Otherwise, the refund would go to your creditors as a non-exempt asset.
You Anticipate New Debts Soon
Once you file for bankruptcy, any new debts incurred after that date will not be included in the bankruptcy. So if you anticipate a new debt—perhaps due to a needed medical procedure—it would be in your best interests to delay filing.
You Recently Transferred Money or Property to a Relative
After filing for bankruptcy, the bankruptcy trustee will have the ability to recover certain “preferential transfers” made prior to filing. For example, if you transferred money or property to a relative within one year of your filing date, the trustee could sue that person to recover the money or property and direct it towards repayment of your debts. In order to protect your relatives, you may want to delay filing until this one-year period has passed.
You Don’t Meet the Eligibility Requirements Yet
One final reason to delay filing for bankruptcy is that you are actually ineligible for bankruptcy. For example, if you have already completed Chapter 7 bankruptcy once, you must wait 8 years to file again. If you tried to file Chapter 7 but your petition was denied, you must wait 1 year.
