Should I File Bankruptcy Now or Wait?

The decision of whether or not to file bankruptcy at all should be undertaken after extensive discussions with a qualified bankruptcy attorney. Once that decision has been made, the question often is whether or not you should file bankruptcy now versus waiting for an additional period of time.

There is a need to time bankruptcy correctly to avoid adverse consequences. Filing too soon could mean you do not get to keep certain pieces of property that you could have kept, and could also mean you do not get to choose which form of bankruptcy you fall under. Filing too late could have adverse consequences for your finances - i.e. making them worse - and could also prevent you from selecting the most appropriate form of bankruptcy.

There are certain events or circumstances in which delaying bankruptcy is advantageous. Again, all of this depends on your unique situation, so discussing bankruptcy with a qualified bankruptcy attorney is wise. One main reason that affects the timing of a bankruptcy is property, specifically a residence. For example, if you are facing the loss of your home, filing a bankruptcy - such as Chapter 13 - could prevent foreclosure. But, filing before you have a chance to modify your loan with the lender means you cannot negotiate with your lender at all. Therefore, if you want to pursue a loan modification, do so before you file.

Your recent income is also a factor. Under Chapter 7, the bankruptcy court will examine your past income over a period of six months. Since 2005, this form of bankruptcy has had a means test that eliminates people who make too much. If you've made more money than usual over the past six months, and believe you might fail the means test and not have your debts discharged, delaying bankruptcy may be to your advantage.

Also, if you expect more dischargeable debt in the near future, you might want to wait to file so it is covered under your Chapter 7 bankruptcy. This does not cover any expenses over $550 paid for luxury goods or services within three months of your filing date, which would be considered fraudulent. Transferring property to hide it from bankruptcy proceedings is also illegal. So, if you have run up a credit card, or have transferred valuable property to other individuals over the past two years (transferring it either by giving it for free as a gift or selling it for less than the market value), you might want to postpone your bankruptcy.

You should discuss the timing of your bankruptcy with your bankruptcy lawyer and decide when to file. As mentioned above, the timing of the filing is very important and could impact the consequences you will face as you discharge or repay your debts.