Many people who file for bankruptcy must do so urgently to prevent a significant loss, such as avoiding being evicted from their homes. If you can afford to wait, though, here are two tips for timing your bankruptcy to maximize your chances of discharging debt while minimizing problems.
Wait for Your Income and Expenses to Normalize
Your income and expenses will play a big part in your bankruptcy filing. In a chapter 7, the information is used to determine whether you'll pass the means test, while in a chapter 13, it's used to figure out how much your monthly payments will be.
In either case, you want your balance sheet to accurately reflect your current financial reality. Unfortunately, the court will typically use data from the months prior to your petition's filing date in its calculations. For instance, the chapter 7 bankruptcy means test uses your income and expense numbers from the previous six months.
The problem is those numbers may give the court a skewed view of your finances. If you suffered a job loss, your petition may make it appear you have plenty of money when, in fact, you won't have any income going forward, for example.
Thus, it's a good idea to wait a few months for your income and expenses to normalize before filing for bankruptcy. This ensures the decisions made in your bankruptcy case match what your finances actually look like. For instance, the court will ensure your chapter 13 payments fit your budget.
The amount of time you should wait to file depends on your situation. So, you should consult with a bankruptcy attorney for advice on the best time to submit your petition.
Wait Until the Lookback Period Expires
The bankruptcy trustee will look at the financial transactions you've made in the years prior to filing your petition. Depending on what the person finds, you could be hit with some particularly troublesome court decisions. For instance, if you transfer property to a family member, the trustee may think you did so to hide assets and require the recipient to turn the property over to the court for inclusion into your bankruptcy estate.
The good news is, the trustee will only look back a certain amount of time, depending on the asset. The lookback period for payments on debts is 90 days for general creditors and one year for relatives and friends, for example. Thus, it's possible to run out the clock on transactions that concern you to avoid having it factor into your petition.
However, you need to tread carefully here. One wrong move and you could be accused of bankruptcy fraud and get your case thrown out of court. You should definitely talk to a bankruptcy attorney about this issue as the person can advise you on the best way to proceed to avoid legal problems.
For help with your bankruptcy petition, contact a bankruptcy attorney.
Share18 June 2021
If your mountain of debt has grown so tremendous that you can't imagine a way out, then you need to contact a bankruptcy attorney. Even though filing bankruptcy can seem like cheating, it is sometimes the only option when you have consumer or medical debt that is consuming your paycheck and then being left unpaid. An attorney can take a look at your finances and recommend a pathway out of debt utilizing one of the several types of bankruptcy available. Learning more about this process can make it seem more approachable. Dig into the articles on this website to get started with that learning.
