Declaring bankruptcy can be a daunting process. Many people, when faced with this decision, often rush into it without considering the potential benefits of waiting. However, in certain situations, it may be advantageous to delay declaring bankruptcy. Filing too early could result in the loss of property that could otherwise have been retained, or necessitate filing for Chapter 13 bankruptcy instead of Chapter 7. You might even discover a better way to manage your debt without resorting to bankruptcy. There are several instances where postponing bankruptcy declaration could prove beneficial.
If you’re currently in the process of modifying your mortgage, it’s a good idea to delay filing for bankruptcy. This is because, once you file, your lender may be unwilling or unable to continue with the modification. It’s important to clarify this situation with your lender before you take any action.
If you’re going through a divorce or separation, it may be best to delay bankruptcy filing. The division of assets and debts during divorce proceedings could significantly affect your bankruptcy outcome.
In certain circumstances where returns have been filed on time, income taxes more than three years old may be wiped out in bankruptcy. Talk to both a tax attorney and bankruptcy specialist if you have taxes that you might want to have discharged. Timing is crucial in these cases.
If you’re expecting to receive an inheritance in the near future, it may be wise to delay filing bankruptcy. If you file for bankruptcy and then receive an inheritance within 180 days, the inheritance may be considered part of your bankruptcy estate and could be used to pay off your creditors.
If you file for Chapter 7 bankruptcy, a court will review your income for the past six months to see if you are eligible. The court refers to the review of your income as the “means test.” If your income is shown to be too high, you may be forced to file Chapter 13 bankruptcy instead. Chapter 13 bankruptcy requires you to pay back a portion of your debts, and Chapter 7 does not.
If your income has recently fallen off because of a layoff or pay cut, by waiting just a few months, you may be eligible for Chapter 7 bankruptcy. A lowered income over the course of six months may make your means test result low enough to qualify. The maximum amount of revenue determined by the means test to be eligible for Chapter 7 bankruptcy differs from state to state.
You may lose property after you declare Chapter 7 bankruptcy. However, there are a few methods or procedures that allow you to keep the property, or you can sell the property and use the proceeds to pay for your debt.
For example, assume you receive a substantial tax refund. If you have just recently received it, or receive it after you file for bankruptcy, you must surrender the return to a bankruptcy trustee. However, if you get the refund and spend it on necessities before you file for bankruptcy, you would use the return instead of surrendering it.
If you own property or assets that are currently worth more than the maximum amount you are allowed to keep from your property exemptions. If you can wait, some of the property may depreciate enough to be lower than the maximum. For example, suppose you have a $60,00 car, but the maximum worth of your assets is only $5,500. However, if you wait a few months, it is possible that the value of the total car may depreciate $500.
If you own property and assets that are not exempt, then the bankruptcy trustee may take your property and sell it. The profits of the sold property would then be given to your creditors. Items that are not exempt are often anything that is not a necessity. So anything that is not your house, car, clothing, household goods, and other necessities may be taken from you and sold once you declare bankruptcy.
However, if you sell the property before you file bankruptcy, you would benefit from the properties instead of your creditors. You could then spend the money on the nonexempt property on property that is exempt. It is possible that doing so may get you into trouble, so it may be wise to seek an attorney’s advice before finalizing anything.
Chapter 7 bankruptcy only clears the debt you have accrued at the time of the filing. Any debt that is filed after will be your responsibility. So if you believe more significant expenses are to arise soon, you should wait and have all the debt removed at once.
If you are still unsure if you should file bankruptcy and how to begin the process, an experienced tax attorney in Atlanta will be your biggest asset to ensure that you maximize the benefits of filing for bankruptcy.