These days, more and more Americans find themselves living on the edge. Though we are amid the longest economic recovery in American history, wages have failed to keep pace with growth. In addition, many households carry high debt burdens, and when a financial disruption occurs, bankruptcy is often the only sane solution.
Consumer bankruptcy comes in two forms: Chapter 7 (liquidation) and Chapter 13 (reorganization).
If your household’s ability to maintain its solvency has been compromised and repaying your debts is unrealistic, then filing bankruptcy under one of these chapters is the only path to a fresh start.
But when should you file bankruptcy?
In most cases, people who file for bankruptcy wish they had done it sooner. As this implies, chances are you’ll benefit most by filing sooner rather than later. However, this is not always the case. Sometimes delaying a filing is either necessary or gets the petitioner the best result.
Consulting a bankruptcy attorney offers the best method for determining when to file the petition. Each case is unique, but there are always several factors that bear consideration. Choosing the timing comes down to balancing the reasons for filing sooner with the benefits, if any, of waiting.
Compelling reasons to file sooner
Bankruptcy does more than eliminate debts. It can also save valuable property and even protect your paycheck. If you are facing any of the below situations, strong consideration should be given to filing quickly, perhaps even on an emergency basis.
Your home is being foreclosed upon, and you want to keep it
Once foreclosures are underway, few homeowners succeed in redeeming their properties. Unless you have a way to pay off the balance, losing the home is a matter of time.
Bankruptcy stops foreclosures immediately. This pause gives you time to work out your finances while unencumbered by many other types of debts. Though a Chapter 7 requires liquidation of property, in many jurisdictions, a principal residence can be kept if the equity remains below a certain level; under a Chapter 13, a home can always be kept, provided a payment plan is approved by the court.
If the lender is in the final stages—even within days—of completing the foreclosure, an emergency filing suspends the process.
You are subject to wage garnishment
Wage garnishments are immediately stopped by a bankruptcy filing. Any money already garnished is lost, so filing quickly, ideally before the garnishment takes effect, is often advisable.
Your vehicle has been, or is about to be, repossessed
If you are in default on your vehicle note, the repo man lurks right around the corner. Once a bankruptcy case if filed, the lender is legally required to call off the repo. You keep the vehicle for at least the duration of the bankruptcy case, and it’s also possible to reaffirm the debt and keep the vehicle after discharge. If the car has been repossessed, bankruptcy can get it back but only within a very limited window of time.
Compelling reasons to delay filing bankruptcy
Sometimes, it’s better to wait or legal requirements necessitate it.
You owe homeowner’s association fees
If you still live in the home but plan to move, you can discharge all debt to a homeowner’s association by filing a Chapter 7 after leaving the home. If you file while still residing there, the discharge doesn’t apply to fees charged after the filing date.
You have a previous bankruptcy
The bankruptcy code allows for a Chapter 7 discharge every eight years. In addition, a Chapter 7 discharge must occur at least four years after a Chapter 13. If you want to file a Chapter 7, waiting may be the only option; however, you can file a Chapter 13 at any time.
You recently transferred assets, purchased a big-ticket item or acquired large credit card debts
Bankruptcy trustees look back to ensure the petitioners have not made big purchases or acquired large debts just before filing. In addition, they are on the lookout for property transferred out of your name. Before filing, tell your attorney about any recent transfers, acquisitions or debt to ensure a proper amount of time has passed.
Most bankruptcy filers wish they had started the process earlier. The sooner you file, the sooner you are free of unsustainable debts that won’t disappear any other way. There are numerous factors that go into the decision of when to file bankruptcy. A bankruptcy attorney will help you determine the ideal timing for your case.
With 20 years’ experience and knowledge, the bankruptcy lawyers at Hines Law will guide you every step of the way no matter what specific issues you may be facing. Our bankruptcy firm specializes in Chapter 7 and Chapter 13 filings and we are committed to safeguard your interests and future by providing the right solution for your debt relief. Call us today for a Free Case Evaluation!