When to File for Bankruptcy

Though filing for bankruptcy can be accomplished in a few days, strategic planning often goes a long way. Discussing your situation with an attorney sooner, rather than later, is always the favorable course of action to decide when to file for bankruptcy.

Due to loss of job, medical bills, student loans, underwater mortgage (or many other reasons that cause financial crisis), individuals, couples, or businesses may choose to file for bankruptcy to relieve the burden of overwhelming debt. The timing of the bankruptcy filing should be planned to help the individual debtor get back on their feet as quickly as possible after the bankruptcy discharge, and an experienced bankruptcy attorney can evaluate your individual situation.

There are benefits if you file for bankruptcy sooner rather than later, and vice versa. The right timing for bankruptcy will take into consideration the entire picture of debt: types of debt, reasons for debt, and likelihood of the most successful results.

Delay Filing for Bankruptcy

If you are expecting to accrue additional overwhelming debt, such as medical bills, then you should wait to file for bankruptcy so that the additional debt can be included in the discharge. You may want to wait and file for bankruptcy until the foreclosure on your home is certain or you are near to being evicted.

NOTE: accruing additional debt does NOT include debt on luxury items or services. The bankruptcy trustee or creditor can ask the court to exclude debt from your discharge. Do not run up credit card balances or buy unnecessary items.

If you need to review and make provisions for exempt assets, such as getting household goods, homestead deed, or anticipated property through inheritance, divorce, or life insurance, then you may also wish to delay bankruptcy filing until after that event. In these circumstances it is especially important to consult with bankruptcy lawyers since incorrectly acquired assets may not be exempted.

If you have tax debt that will be discharged after the passage of additional time, then you may want to wait to file for bankruptcy so that you can receive a tax refund that otherwise would be used to repay creditors.

File for Bankruptcy Quickly

If you need to stave off garnishment, eviction or disconnection of utilities, then you will want to speed up a bankruptcy filing. The bankruptcy filing issues an automatic stay that will stop these proceedings as well as freeze collection harassment and repossession attempts.

If your income recently increased significantly, then you should consider filing for bankruptcy quickly. The longer you maintain the higher income, the more likely it will affect your ability to pass the means test.

Timing your bankruptcy filing has pros and cons with either choice. Overall, there is no substitute for solid bankruptcy guidance from trained legal professionals.