With Bankruptcy Certain, The Question Remains: Should You File Now Or Delay The Process For Any Reason?

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With Bankruptcy Certain, The Question Remains: Should You File Now Or Delay The Process For Any Reason?

8 November 2017
 Categories: Finance & Money, Blog

Once you've reached the conclusion that you need to file for bankruptcy, your whole world may begin to unravel. A million questions and scenarios will run through your mind, all leading to a seemingly dismal financial future. Don't look at this like you're throwing yourself to the wolves with no control over what's going to happen, though, as you do still have a very crucial role in how things go. Although you don't want to rush into a bankruptcy filing, certain issues you're facing may mean filing sooner, rather than later, is in your best interest. Since many variables influence your decision, it's important to take them all under consideration before you choose when is the most appropriate time for you to file.

Reasons To File For Bankruptcy Now

Making the choice to file bankruptcy (either Chapter 7 or 13) right away may put you under a lot of pressure; however, it could save you from a worse fate, depending on your immediate situation:

  • If you expect to receive a repossession notification on your vehicle and you need the car to survive, bankruptcy means your creditor (in this case, the auto loan lender) must cease and desist in their attempts to collect.
  • Bankruptcy can only save your car if the collection action was not initiated prior to the filing.
  • To save your home from foreclosure, it may be wise to file for bankruptcy as soon as possible or an Emergency Bankruptcy Petition, which allows for fast filing, without all the lengthy and laborious paperwork.

Reasons To Delay Filing

In many cases, you're better off delaying a bankruptcy filing, in order to calculate and control (some of) the gains and losses that come out of the courtroom. While the most important assets in your possession may be your home and vehicle, if you're not in immediate danger of loosing them, try looking at the larger picture:

  • If your income has recently gone up or down, that may impact the average income the court will calculate (called the "means test") to determine what you're able to afford in the settlement.
  • Delay filing if you need the average to reflect the recent increase or decrease in your earnings.
  • If you think you may want to restructure your mortgage or other loan, do so now, as lenders may not be willing to work with you after you've declared bankruptcy or the notes may be non-negotiable once they're part of the settlement.
  • Any debt you anticipate incurring in the future can be included in your proceedings, if you delay filing until you actually incur the debt. 
  • Tax refunds you are entitled to can be absorbed by the bankruptcy settlement and used by the trustee to pay creditors; thus, if you want that refund, hold off on filing.
  • You may want to sell valuables now and retain the cash, rather than allowing that money to be distributed by the trustee (of the bankruptcy).
  • If you intend to move to a new state where exemptions are more favorable than where you're living now, delay your bankruptcy litigation until you're in the new state.

Red Flags To Avoid No Matter When You File

If, when you do file, any financial transactions you've made raise eyebrows, the money involved can be taken back and brought into the bankruptcy equation. This is called "recapturing" and it will be done if the bankruptcy trustee suspects you made the transaction for the specific purpose of hiding it from due process. This unwanted attention to your money matters can be avoided, by taking precautions prior to filing:

  • Don't spend too much on frivolous items, such as expensive jewellery, electronics and the like.
  • Don't give away or transfer high-value assets, especially property.
  • Don't withdraw cash-back on your credit cards in amounts which exceed normal living expenses, as withdrawing large amounts, then trying to discharge it as debt in a bankruptcy filing implies abuse of the process.

Resurrecting Your Financial Self After The Bankruptcy

If your bankruptcy cleared you of obligations to pay your debt (Chapter 7), it's important that you reorganize your budget, in order to start rebuilding your credit. Avoid buying anything you don't need, incurring heavy debt or repeating any of the mistakes you may have made that led you to bankruptcy in the first place. If your bankruptcy resulted in the court ordering you to repay creditors (Chapter 13), be sure you can afford the payment structures and that you make repayment an absolute priority. Focus on earning more, saving as much as you can and repaying on time, along with maintaining your duty to current bills, such as utilities and rent. If, for any reason, you're unable to meet the obligations of your Chapter 13 settlement, contact the trustee and/or your attorney immediately, to avoid further legal complications.

Bankruptcy is a complicated matter and although your current circumstances may mandate acting with urgency, it's imperative that your decisions be well thought out and accompanied by sound legal and financial advice. You're going to want to put all of this behind you as soon as possible, in order to begin anew; however, that may not be feasible if you didn't enter into the filing with all the information and guidance needed to achieve the best outcome available to you. Speak with an attorney from firms like Molleur Law Office for more assistance.