Is There a Better Time to File For Bankruptcy Than Another?
When you choose to file bankruptcy can affect your financial future. Since the timing of your bankruptcy filing can dictate if you get to keep the $7,000 of tax refund or not. Below are some scenarios that can warrant your urge to postpone your bankruptcy filing:
You Have Earned A Lot More Recently
The bankruptcy law has been changed since 2005 so as to make bankruptcy harder. To qualify for filing Chapter 7 bankruptcy, you have to pass a "means test" designed to weed out people who have sufficient money to pay back the creditors. If your income is higher than the median income of the state you are living in, you will have no choice but to file under Chapter 13 bankruptcy. Chapter 7 bankruptcy is the perfect alternative because most (if not all) of our debts are wiped clean whereas some debts with a Chapter 13 bankruptcy filing survives.
Without doing anything illegal, if you can lower your income for the upcoming months, then you can potentially still file for Chapter 7 bankruptcy after that when the average amount of your income will be lowered. Chapter 7 bankruptcy is much more ideal if you are going to be file for bankruptcy shelter because you do not have to pay back the creditors. Even if you have to wait for a few months to become eligible for Chapter 7 bankruptcy, you should still do it.
If You Transferred Property Or Have New Debt
You can delay your bankruptcy filing if any of the following situation applies to you:
More than $550 of charges appear on a credit card 90 days before the filing
If you have conducted a large transaction such as this, you can raise suspicion with the bankruptcy court. The bankruptcy judge might think you are trying to wipe away a debt that you knowingly incurred. You do not want to bring attention to yourself with a large dollar transaction such as this. You can wait 90 days after the charge has been made, then file for bankruptcy.
More than $825 of cash advance was withdrawn from asingle credit card 70 days before the filing
You don't want the bankruptcy court to think that you are committing fraud by withdrawing money from the credit card and subsequently declaring bankruptcy to get rid of this debt. Once 70 days have gone by since you made that cash withdrawal, you will be able to remove this credit card debt through bankruptcy process.
More than $600 were paid to a single creditor 90 days before the bankruptcy filing (or 1 year if it is a relative)
The bankruptcy can seek to recuperate this money to pay back the creditors. If you want to include this debt as part of your bankruptcy petition, and you don't want to raise any suspicion with the bankruptcy court, wait 90 days (or 1 year if it is a transaction with a relative) and you will be clear of any wrongdoings.
In the past 2 years, did you sell or transfer any property to anyone
It can lift severe doubts inside the eyes of the bankruptcy judge that you are hiding assets from the creditors when you have sold your property for less than the market price, or if you have transferred the property to someone else. The bankruptcy court can either dismiss your bankruptcy case or sell your property and pay back the creditors. Make sure you have sold the property at or above market value, or wait 2 years after selling the property before filing for bankruptcy shelter.
If Your Mortgage Lender Is Willing To Modify Your Loan
Only after the loan modification has concluded, then you can think about filing for bankruptcy protection. Most believed that mortgage lenders will not even consider loan modification if you are filing for bankruptcy. The reason is that once you have filed bankruptcy, the bankruptcy discharge cancels the promissory note part of the mortgage, and not the lien on the house. Since the promissory part of the mortgage is the portion that is negotiable, the bankruptcy process actually gives the mortgage lender no leverage to negotiate.You will want to delay your bankruptcy filing if you have a mortgage lender who is willing to modify your existing loan.
There is a school of thought that wants you to delay filing bankruptcy if you will incurring new debt in the near future. I am strictly against anyone doing this. If you know you are going to be filing bankruptcy, and then you knowingly racked up $20K-$50K in medical expenses (such as plastic surgery or surgery that are only preventive and not life threatening), that to me has some kind of fraud implication to it. Fraud to me is when you knowingly do something illegal and hoping to get away with it. In this case, you have took on more debt knowing that it can be erased through bankruptcy.
Time is of essence in most cases, but when it comes to bankruptcy, take your time to make sure that it is the best and only choice for you. Events such as car repossession, wage garnishment and judgment lien on your house can be the "straw that broke the camel's back" and force you to file bankruptcy now. Bankruptcy should not be a abrupt event. You should consider this drastic option cautiously and make sure you have talked to bankruptcy professionals who can give you good advice.
For additional information on bankruptcy, please visit our website at ToFileBankruptcyOrNot.com
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