An unscrupulous lawyer probably tell you that the best time to file bankruptcy is right now. An experienced New York bankruptcy lawyer by contrast would tell you that timing a bankruptcy filing depends on multiple factors. Here are several that can encourage debtors to file sooner or later.
In the case of filing sooner:
- Preventing an imminent home foreclosure. This is probably the best reason to file an emergency petition or skeletal bankruptcy. Another might be when a debtor is approaching death and bankruptcy would help his or her heirs more than probate.
- Stopping wage garnishments, repossessions, or even utility shut-offs. Filing sooner on account of these items works for similar reasons, but they aren’t as imminent as losing a home.
- Avoiding taking the chapter 7 means test. Debtors’ annual incomes are based on their earnings over the previous six months. It’s possible to time the means test to stay in chapter 7 by filing earlier if, say, a bonus would lift one’s income over the state’s median family income.
- Improving credit. Finally, debtors might want to file bankruptcy to improve their credit scores. Filing sooner starts this process.
In the case of filing later:
- Taking the financial-education course. Many self-represented debtors make the mistake of filing bankruptcy without taking the mandatory financial-education course beforehand. Failing to do so results in a dismissal, but debtors can refile. I raise it because it’s the most common reason to delay filing.
- Repaying a debt to a family member. Trustees can try to avoid (that is, undo) loan payments by debtors to family members within a year of filing bankruptcy. This is an awkward situation worth preventing.
- Becoming eligible for discharge again. Debtors who’ve filed in the past may want another discharge. It’s going to be worth their wiles to wait until they’re eligible to discharge their debts again.
- Escaping the penalties for luxury purchases or cash advances. Luxury purchases in excess of $950 made within 90 days of filing and cash advances greater than $675 taken out 70 days within filing are presumptively fraudulent. Waiting to file beyond these dates will reduce that window.
- Avoiding taking the chapter 7 means test. This is the same point as filing sooner but under opposite circumstances. If a debtor receives a bonus, for instance, then it might raise his or her income to the point of taking the means test. If staying in chapter 7 is important, then waiting can be a good idea.
- Waiting for higher median family income numbers. Debtors whose incomes are around the median family income for their states might want to wait past March 30th or October 31st, which is when the family income levels are updated. This way they may avoid taking the means test.
- Discharging tax debts. Debtors may have tax debts that can be dischargeable if they’re old enough.
Bankruptcy is a situation-specific process, but no matter what yours is, talking to an experienced New York bankruptcy lawyer can help you decide whether it’s best to file sooner or later.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Bankruptcy Attorney Brooklyn NY Bruce Weiner for a free initial consultation.
