How long should you wait to pursue bankruptcy?


Sometimes, it may be better to put off on filing for Chapter 13 or Chapter 7 bankruptcy. If you file too soon, you may lose property that you may have been able to keep. You may even be able to avoid bankruptcy altogether. Here are a few situations when it might be better to delay bankruptcy.

Modify Your Mortgage

Often, individuals file for bankruptcy to delay a foreclosure. While it sounds like a viable solution, some people just file for bankruptcy way too easy, and that makes it difficult to get a mortgage modification. After you file bankruptcy, most lenders will not continue negotiations with you for your mortgage. The bankruptcy cancels the promissory note of the mortgage. Specifically, there is nothing left to negotiate. It’s wise to know about mortgage modification before you file for bankruptcy. 

Recent High Income

With Chapter 7 bankruptcy, the court will review your income for the past six months to decide if you’re eligible. It’s known as the “means test”. If the court finds that your earned income is too you, you’ll have to file for Chapter 13 bankruptcy. With Chapter 13 bankruptcy, you have to pay for a part of your debts.

If you’ve had a pay cut or been laid off, you can become eligible for Chapter 7 bankruptcy. All you have to do is hold off a few months. Then, your decreased income is figured into the means test. As a result, your average income just may be low enough to qualify for Chapter 7. For example, if your average gross income for the past six months was $9,000 per month, but you’re now getting $1,600 a month in unemployment. Once you wait a few months, your six-month average gross income will be lower. 

Property and Money You Want to Keep

There may be a property that you would forfeit in a Chapter 7 bankruptcy if you file now. But, if you wait, you’ve got time to sell the property and use the money that you get from the sale. More examples of this are tax refunds, property exceeding the exemption maximum and nonexempt assets. If you are getting a tax refund of $3,000, you’d have to give it to the bankruptcy trustee after you file. If you get your tax refund before you file, you’ll get to keep the full tax refund. 

If you have a property that exceeds the exemption maximum, it’s worth more than what you are allowed to keep through property exemptions. If you wait to file bankruptcy, the property may depreciate and then fall within the property exemption amount. For example, if your car is worth $10,000 but the state exemption laws only allow $8,000, the car’s value could drop if you wait a few months and fall withing the exemption maximum.

If you have nonexempt assets, the bankruptcy trustee can take those assets and sell it to your creditors. Things like clothing and household goods are nonexempt assets. If you wait to file bankruptcy, you can sell those non-exempt items and keep the proceeds. 

New Debts on the Horizon

If you see other expenses in the near future, it’s wise to delay filing for bankruptcy. As a rule, Chapter 7 bankruptcy only dismisses debts you have on your filing date. Debts that crop up later will be all yours. For example, if you’re going to have surgery and have to pay for some of the expenses, those expenses will be dismissed if you wait to file bankruptcy until after you’ve had your medical procedure. 

If you’re considering bankruptcy, contact bankruptcy attorney Jerry E. Smith. Jerry E. Smith is an experienced bankruptcy attorney who can help you in many ways. He can help stop sheriff’s sales, bank account garnishments, lawsuits, tax collections, mortgage foreclosures and aggressive collection actions. He will review and access your entire financial situation and put together the best financial solution for you. It may be by restructuring your debt or by eliminating the entire debt. Call him today if you’re facing bankruptcy. He offers a free initial consultation in person or via phone. 

Filing for bankruptcy is a very personal decision. Some individuals find it helpful to file bankruptcy if they can’t pay their bills or don’t think they will be able to pay their bills in the future. It can be very stressful when you want to free yourself from debt. Those who have their wages garnished can benefit from bankruptcy. Just keep in mind that the laws about bankruptcy have changed since 2005. It’s much more complicated to file for bankruptcy today and get free from past debts. You need to seek advice from a knowledgeable bankruptcy attorney before deciding whether or not filing for bankruptcy is the best solution for your situation. Turn for help from attorney Jerry E. Smith. He has the experience and the expertise to assist you in making that decision. Attorney E. Smith will guide you the whole way and both of you can come up with the best solution together. He’s helped many others fix their financial problems and can help you, too. 

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