Many people who file bankruptcy have neither the time nor the reason to wait. They might be facing foreclosure, debt collectors, wage garnishments, etc., so there isn’t much point in delaying their filings. For others, though, there can be compelling reasons to file bankruptcy in New York later rather than sooner. Here are a few.
(1) This year’s taxes. Debtors can handle taxes for this year by electing to take a short tax year, a topic discussed here, or they can wait until next year when the tax debt comes into being. There are times when it’s worthwhile to wait until January, since any assets placed into the bankruptcy estate will go to pay priority tax debts that couldn’t have been discharged anyway. For people filing in chapter 13, tax debts that are incurred on January 1st can be included in the repayment plan without interest.
(2) Older taxes. The bankruptcy code sets rules for discharging federal income tax debts. If the tax is three years old (from the day they were due), the debtor included the tax debt in a return at least two years ago, the debtor filed a return the year the tax was due, and the IRS assessed the tax at least 240 days before the petitioner files, then the tax debt can be discharged. Some debtors’ tax debts might not be dischargeable unless they wait longer.
(3) Transfers. Trustees can avoid some debtors’ transfers to creditors before a bankruptcy petition is filed. The trustee’s goal is to prevent debtors from getting away with preferentially treating creditors. Transfers made to most creditors 90 days before filing can be avoided, as can transfers to “insiders” (family, business partners, and others) made within the previous year. Ensuring a transfer goes through is another good reason to wait.
(4) Fraudulent Debts. Creditors will file actions against debtors if they think the debtors borrowed money from them with no intent to repay it. For example, the Bankruptcy Code considers debts above $500 spent on luxury goods and services incurred within the last 90 days to be fraudulent and nondischargeable. The same goes for cash advances greater than $750 made 70 days before filing. Filing after that gives the debtor a chance to beat the creditor in an adversary proceeding.
There are plenty of other reasons to postpone a New York bankruptcy, but there’s no reason to wait to discuss the situation with a bankruptcy lawyer. A consultation can help determine the pros and cons of filing sooner rather than later.
For answers to more questions about when to file bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced business bankruptcy lawyer Bruce Weiner for a free initial consultation.
