If you're considering filing for bankruptcy, it's important to understand that sometimes the timing of your filing can have a big impact on your case. There are many factors to consider when filing for bankruptcy, and while you may be tempted to file bankruptcy sooner rather than later, there are certain instances where it may be more beneficial to wait.
Depending on your case, it may make sense to wait in order to keep more of your assets, discharge more debts or to avoid trouble with your bankruptcy trustee. An experienced bankruptcy attorney will be able to advise you as to whether you should wait to file for bankruptcy. Here are four common reasons to delay your bankruptcy filing:
1. You Just Moved to a New State With More Favorable Exemptions
Every state has its own set of bankruptcy exemptions (some use state exemptions, some use federal exemptions and some give the debtor a choice) that determine how much property you can keep. If you've recently moved to a new state, the exemptions in your new state may be more favorable than the exemptions in your old state. In order to prevent people from temporarily moving to take advantage of a state with more generous exemptions, you need to be living in a state for at least two years before you can use its bankruptcy exemptions. If you've recently moved, you may need to delay your bankruptcy filing if you want to take advantage of the exemptions in your new state.
2. You Recently Purchased Luxury Items or Took out a Cash Advance
If you have purchased more than $650 in luxury goods on credit from a single creditor within ninety (90) days of filing for bankruptcy, you may not be able to wipe out the debt in bankruptcy. Likewise, if you take out more than $925 in cash advances from a single creditor within seventy (70) days of filing, you will also not be able to discharge the debt. In both of these cases, you may want to wait to file for bankruptcy.
However, it's important to remember that if you take out debt without intending to pay it back, it is considered fraudulent, and the debt may not be discharged during bankruptcy. The creditor can actually file a proceeding against you in the bankruptcy court called an adversary proceeding seeking to have all of the debt or a portion of its debt declared non-dischargeable. If this happens, you will need to discuss the facts and circumstances with your attorney immediately.
3. You Expect More Debt in the Near Future
Your bankruptcy discharge will only eliminate the debts that exist at the time of filing your case, and you will not be able to wipe out debt that you acquire after filing for bankruptcy. If you expect to accumulate more debt in the future, such as medical bills, you should wait to file bankruptcy.
4. You Recently Lost Your Job or Took a Pay Cut
If your debts are primarily consumer debts and you are looking to file for Chapter 7 bankruptcy, you will need to pass the means test. The means test looks at your average income over the six-month period before you file for bankruptcy. People with an income lower than the state average usually pass the means test. Or, if you have special circumstances, you can pass the means test.
If you recently started a lower-paying job, or if you recently took a large pay cut at your job, your means test average income will decrease with each month that you wait to file. Waiting a few months to file for bankruptcy may help you pass the means test in order to qualify for Chapter 7 bankruptcy.
It's not always easy to weigh the pros and cons of filing for bankruptcy immediately against the possible consequences of waiting. If you're unsure as to whether you should wait to file for bankruptcy, the best thing you can do is to speak with an experienced bankruptcy attorney. An experienced bankruptcy attorney will be able to review your case and help you determine when to file for bankruptcy.