If you face financial difficulties and are considering bankruptcy, it helps to know that timing your bankruptcy petition can significantly determine the outcome of your case. Some situations call for filing right away, while the others require you to delay a little bit to discharge more debts, keep more assets, or avoid problems with your bankruptcy trustee. When to file or delay your bankruptcy petition depends on the circumstances of your situation. This article provides a guideline on how to time your bankruptcy petition for a more favorable outcome. Contact a competent bankruptcy lawyer for more information and guidance in filing for bankruptcy.
Delay Filing for Bankruptcy If You Wish to Modify Your Mortgage
Most people rush to file for bankruptcy to delay losing their homes to foreclosure. If you cannot make prompt payments on your home, your mortgage lender will act fast and a foreclosure is inevitable. But you can delay the process by filing for Chapter 7 bankruptcy before your mortgage lender acts. However, that could be detrimental if there is the hope of obtaining a modification on your mortgage. A modification changes the terms of your mortgage repayments permanently, giving you a fresh start in which you can manage the income you are currently receiving.
Filing for bankruptcy to delay a foreclosure can seem like a good idea from the start, but you might lose your chance to obtain a modification on your mortgage. Your mortgage lender possibly will not be willing to enter or continue negotiations on your mortgage once you file for bankruptcy. Once you are in an active bankruptcy, doing a loan modification would require court approval, which is an additional hoop you would need to jump through.
If you feel that you could benefit more from a mortgage modification, do not be quick to file for bankruptcy. You can as well avoid bankruptcy altogether if your primary debt is the mortgage. First, find out how you can benefit from modification and base your decision on that.
But if you want to file for Chapter 13 bankruptcy and face foreclosure, you will want to act fast to avoid losing your home. Chapter 13 bankruptcy will help you save your home. By filing your petition, you stop the sale of your home and are given a way to catch up with your late mortgage payments as you manage your other debts.
In some situations, in the alternative, filing for bankruptcy might give the mortgage lender an additional incentive to offer you a loan modification. We have seen it too often where a debtor is denied a loan modification, files for bankruptcy, and then is offered a loan modification once the case is filed. Again, there are many ways to look at loan modifications when dealing with bankruptcy filings.
Delay Filing for Bankruptcy If You Expect Money Soon
The essence of filing for bankruptcy is to obtain relief from your debts. Thus, you need not file for bankruptcy if you expect a considerable sum of money soon. The money can cater to your debts, leaving you with minimal financial worries.
Bankruptcy helps you deal with the debts you cannot manage with your current income. If you expect that your financial situation will soon change soon, you can delay filing your bankruptcy petition until you are sure that bankruptcy is the only way to deal with debts, even after receiving the expected money.
Do not be quick to file for bankruptcy until you are sure that the benefits surpass the shortcomings. Remember that you are bound to lose a lot by filing for bankruptcy. For instance, the process will leave you with a lower credit rating that could make it challenging to acquire a loan at fair terms.
Additionally, you will be expected to disclose all the money you have, including what you are owed and are expecting on the paperwork. Disclosing requirements do not end once the bankruptcy court closes your case. You must continue updating the trustees of every income you receive, even if it is an inheritance or a lottery winning for a period of 6 months from when a Chapter 7 is filed—and through the entire 3-to-5-year Chapter 13 case.
Thus, if you are expecting a substantial amount, you could delay the filing process until you are sure that the money is insufficient to pay off your debts. But if what you expect is not enough to start with, you can file the petition right away. If you do not plan to spend the money on paying your creditors, make sure you spend it on necessities like car repair, renovations around your home, or personal needs. Remember that your trustee will need proof of how you have spent the money to ensure that you are not avoiding paying off your debts.
Delay Filing For Bankruptcy If Your Current Income is High
If you have been earning a low income and are deep in debt, considering bankruptcy is understandable. Your low income could be insufficient to keep up with debt repayments. Bankruptcy could provide a way out of your debts and enable you to start life afresh. However, if your earnings have suddenly gone up, you will want to see how things are going before filing your bankruptcy petition. A higher-income means you have more to spend on debt repayment and that could help you pay off your debts without seeking legal help.
Additionally, the bankruptcy court will first determine your eligibility for bankruptcy before approving your application. If you consider filing for bankruptcy 7, the court will consider your income for the last six months to establish your eligibility. If your current income is high, you can only qualify for bankruptcy Chapter 13, in which you are required to pay at least a portion of your debts over a 3-to-5-year payment term, depending on your income and asset levels.
But if your earnings have suddenly dipped due to a layoff or pay cut, you could be suitable for bankruptcy Chapter 7 if you wait a few more months to file your bankruptcy petition. You have a high chance of passing the means test if you have several months of decreased income to show. If you do not lose much by delaying your bankruptcy petition for a few more months, the delay is a good idea if it helps you make a more informed decision.
Delay Filing for Bankruptcy If You Have Assets You Cannot Afford to Lose
Filing for bankruptcy could result in the loss of valuable assets that have cost you money and time to acquire. For instance, you could lose valuable assets immediately after filing for bankruptcy in Chapter 7 if the said assets are not included in exempt properties. You can keep those assets a little longer or have enough time to sell and use their proceeds if you delay your bankruptcy petition a little longer. Examples of valuable assets you cannot afford to lose in bankruptcy are:
A Tax Refund
If you receive a tax refund after filing for bankruptcy, you must disclose it to your bankruptcy trustees, who could use it to repay some of your debts. By delaying the bankruptcy petition, you could take time to spend the money on personal necessities like medical needs or use it to resolve your debt issues. That way, you will enjoy the full benefits of your money.
Assets Exceeding Bankruptcy Exempt Maximum
Chapter 7 bankruptcy allows you to keep some of your valuable assets up to a given limit. Assets beyond that limit will be sold off to repay some of your debts. If you have more assets than can qualify for a bankruptcy exemption on, you could delay filing the petition until you can figure out what you want to do with the assets exceeding the exempt maximum. A property like a vehicle depreciates with time and could fall under property exemption after a few months. A slight delay could enable you to keep more of your assets after filing for bankruptcy.
Non-Exempt Assets
Some assets are automatically non-exempt based on the value and you cannot keep them after filing for bankruptcy. The trustee will sell the property immediately after the court grants your bankruptcy petition to help pay off your debts. You can delay the filing process to sell off these assets for their current market value. You can then spend the money on necessities. That would not feel like a significant loss compared to quickly selling off the property and using the proceeds on creditors. You could even use the money to acquire a bankruptcy-exempt asset.
Delay Filing for Bankruptcy If You Are About to Enter Into More Debts
The whole idea of filing for bankruptcy is to deal with your current debts and then you can start life afresh, free of debts. It is advisable to take time before you acquire more debts to be financially prepared to pay off the new debts. You will not find yourself in the same pit bankruptcy saved you from if you are more careful.
Thus, if you are about to acquire more debts, it's better to hold off filing your bankruptcy petition until you have acquired them. Bankruptcy Chapter 7 only takes care of your current debts, at least those you have acquired, until a bankruptcy court grants your petition. You are to take care of the debts you acquire after the filing date.
For instance, if you have a medical procedure in a few months and you do not have enough money to pay for all the expenses, you can delay filing for bankruptcy until you undergo the procedure. Chapter 7 bankruptcy will wipe out all those expenses if you could wait to file the petition after the procedure.
Delay Filing for Bankruptcy if You Sold an Asset Within the Last Two Years
Typically, there is nothing wrong with selling or giving away your assets. However, it could be a bad idea if you do that within the period you are planning to file for bankruptcy. Bankruptcy trustees will quickly assume that you did so to keep that property from your creditors. The law allows trustees to take that asset back, sell it for its current market value, and then use the money to pay off their debts.
Remember that transferring or selling an asset right before filing for bankruptcy to keep it from creditors is fraudulent. That could land you serious legal issues. If you have recently sold or transferred a valuable asset before filing for bankruptcy, you might want to take some time. Your bankruptcy lawyer will advise you on the right time to start the bankruptcy process after the sale or transfer.
Delay the Bankruptcy Process if You Are Moving to a New State With Better Bankruptcy Exemptions
A bankruptcy exemption allows you to keep some of your assets after the bankruptcy process. Each state has its rules on what assets and asset value are exempted from bankruptcy. If you are about to relocate to a new state and are considering filing for bankruptcy, first determine the bankruptcy exemption rules of the new state. If the new state has more favorable bankruptcy exemptions and your assets would be at risk in the prior state, you might want to delay the process further until you are settled in the new state for a certain period of time. That could enable you to keep much of what you have already acquired after declaring bankruptcy.
Understanding the bankruptcy laws of your current state and the state where you are moving to will help you make an informed decision. Understand that every state has different bankruptcy exemptions. If you anticipate more favorable exemptions in the new state, do not be quick to act. You will require more time to establish primary residence in the new state before you can file for bankruptcy.
But if your current state has better exemptions than the one you are moving to, it is advisable to file for bankruptcy immediately before relocating to the new state.
Find a Competent Sacramento Bankruptcy Attorney Near Me
Are you deep in debt and are considering filing for bankruptcy in Sacramento, CA?
You could benefit greatly from the advice and assistance of a competent bankruptcy lawyer. Our team at Sacramento Bankruptcy Lawyer handles all manner of bankruptcy cases every day. We know the ins and outs of the federal bankruptcy law to help you understand strategies that could benefit your situation. For instance, we can help you determine when to file or delay the bankruptcy process for a more favorable outcome. Call us at 916-800-7690 and let us study the details of your case for a more informed legal strategy during our free consultations. Or click HERE and immediately schedule your free consultation.
