When To Hold Off On Filing For Bankruptcy
When you are drowning in debt, finding the best debt relief option can be a daunting task. To make matters worse, many debt relief options may not always be the best solution for your unique financial situation.
Although bankruptcy can provide asset protection while working to reduce your debt burden, the process can be complicated because it is heavily governed by rules about the filing process. If you have considered filing for bankruptcy, there are a few things you should know about when is and is not a good time to file.
Why You May Have To Wait
Bankruptcy laws dictate strict rules for the filing and completion of the process. The ultimate goal in filing for bankruptcy is to obtain a debt discharge and be alleviated of your debt liabilities either through a debt elimination in Chapter 7 or a debt repayment in Chapter 13. Once the court approves your debt discharge, you are no longer responsible for your debts and the creditors will be required to mark your accounts as having been satisfied. However, obtaining a discharge can be jeopardized by many things.
Previous debt discharges. If you have filed for bankruptcy in the past and had your debts discharged, you may not be eligible to file again for a specified period of time. Bankruptcy laws prevent anyone filing for Chapter 7 to wait (a) 8 years after they received a discharge in a previous Chapter 7 case and (b) 4 years from receiving a previous Chapter 13 discharge. If you are filing for Chapter 13, you cannot file again until (a) 6 years from a previous Chapter 7 discharge or(b) 2 years if you received a discharge under a previous Chapter 13 case.
Previous debt dismissals. If a previous case was dismissed by the court you may be required to wait before filing again. In general, if your case was dismissed due to failure to complete filing requirements or pay the necessary fees, you can re-file after you satisfy the requirements. If the court dismissed your case for suspicion of fraud or other non-logistical reasons, you may be required to wait 180 days before re-filing your case.
Changes to your assets. When filing for bankruptcy protection you will be required to list all of your income and assets in the petition. This includes all of your wages, amounts held in various types of accounts and a list of your personal property that hold value. In some cases, making changes to your assets prior to filing your case may appear suspicious, which the court may deem as fraud. Bankruptcy laws prohibit anyone filers from transferring assets to friends or family members prior to filing.
You may be able to sell assets prior to filing as long as you (a) receive fair market value for the item, (b) claim the income from the sale on your petition and (c) have not spent the money received from the sale of the item. However, even these actions could be questioned by the court, so it is important to keep all of your documents from the sale and be upfront in your filing. A good rule of thumb is that you should wait to file at least 2 years after transferring or selling assets.
Changes to your debts. Many people make the mistake of accumulating new debt before filing their case. Most of the time, your petition will be denied if you have (a) purchased more than $550 on a credit card within 90 prior to filing or (b) taken a cash advance of $825 or more within the 70 days prior to filing your case. The bankruptcy laws set these limits to prevent people from abusing the advantages that bankruptcy has to offer. If you have recently taken on new or more debts, you may be advised to wait at least 90 days before filing your petition.
Before filing for bankruptcy, it is always a good idea to consult a professional bankruptcy attorney to review your case. They can help you determine if bankruptcy is right for you and when would be best time to file your case.
