The timing of a bankruptcy is often an important decision for a debtor that wants to get the full benefit of the bankruptcy stay and the discharge. In a Chapter 13 case, debtors restructure their debt, so the time to file often depends on whether a lender is close to taking back secured property, such as a home (by foreclosure) or a car (by repossession). A Chapter 13 case is often designed to stop creditor actions while the debtor sets up a plan to pay back missed payments on secured debts while eliminating some of their unsecured debt. Waiting too long could result in foreclosure of their home or repossession of their car.
In Chapter 7 cases, there are several other things to consider when determining the best time to file bankruptcy:
• Are there existing lawsuits that may result in a judgment soon?
• Are any creditors garnishing wages based on an already-existing judgment?
• Can all the assets of the debtor be protected at the present time?
• Has the debtor used credit recently, or in a way that a creditor or the Trustee might challenge the discharge?
• Are there tax debts that are too recent to discharge now, but which may be eliminated if the debtor waits a little longer to file?
• Does the debtor currently qualify based on their income over the last 6 months? If not, waiting a few months may make a difference, especially if the debtor has recently had their income lowered, or has become unemployed.
• Pending foreclosures and/or repossessions may also be considered, but Chapter 7 cases often have very little impact on creditor actions against secured property except to delay the action for a short time. In some cases, however, a short delay is all the debtor needs to bring a loan current or work out a manageable modification.
There are times when a debtor has conflicting issues, which can make the timing of the case more complicated. The debtor and his/her attorney then have to decide which is the more pressing issue, and which can be worked around. The attorney should be able to evaluate the options and the likely ramifications of different filing dates.
Anyone considering bankruptcy should consult with an attorney if they are unsure whether this is the right time to file.
For more information or a consultation, please call 661-210-5657, or e-mail mjf4bk@ca.rr.com.