Timing matters in bankruptcy
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Many people consider bankruptcy a last resort for debt problems, but it’s wise to consider bankruptcy sooner rather than later – and then carefully choose when to file. Sometimes filing right away is more beneficial, sometimes delaying is better and sometimes filing Chapter 13 then converting to Chapter 7 may yield the most complete debt relief. Here's what you need to know about bankruptcy timing:
#1 Credit Card Activity Can Cause Problems
If you've used your credit cards recently, you may need to rethink when to file bankruptcy, particularly Chapter 7. Cash advances of more than $925 made in the 70 days prior to your bankruptcy filing – or purchases of “luxury” goods and services within 90 days of filing – can be deemed fraudulent.
Your card issuer can then fight the inclusion of this debt in your bankruptcy case, complicating the process and lessening your debt relief. If you’re using plastic only for necessities, it shouldn’t be a problem. However, you should never accrue any debt that you don’t intend to pay. That’s not ethical.
#2 Wage Considerations Are Important
Your last six months of average income are what determine whether you’re eligible for Chapter 7. If you've recently lost your job or had a pay cut, waiting until your pay drops may make you eligible for this more sweeping debt relief. If you don't qualify for Chapter 7, waiting until a pay drop may still lower the initial payments on your Chapter 13 repayment plan.
#3 Consider Your Mortgage Status
If you’re current on your mortgage payments and it’s your other debt that’s the problem, your home loan may not play into timing concerns. However, if you’re trying to obtain a mortgage modification or refinance, you may want to wait until it goes through – or is rejected – before you file bankruptcy.
If you’re behind on your mortgage payments, you need to consider whether your home is worth keeping. If you simply can’t afford the home or are in a negative equity situation, you may want to give it up as part of your bankruptcy. In that case, timing is especially sensitive, and your bankruptcy attorney can advise you about what's best.
#4 Are You Expecting a Bonus, Inheritance or Windfall?
North Carolina asset exemptions allow you to protect a certain amount of property, cash, and other assets, but if you’re anticipating a windfall like a big bonus, an inheritance or other payment, this should definitely factor into your bankruptcy considerations.
If the money is enough to catch up your debts, that’s likely the best approach. However, if it’s not enough to pay off your debts, but only enough to complicate your bankruptcy process, such as a $5,000 to $10,000 payout, you need to discuss with your lawyer the timing of the payment and your petition filing.
#5 Plan Ahead by Consulting an Experienced Attorney
If your debt is out of control, speaking to an experienced and reputable North Carolina bankruptcy attorney is a wise approach. The initial consultation is typically free, and you can bring in statements showing your income, debts, assets, and delinquencies to help you discuss options with the lawyer.
They should be able to tell you if bankruptcy is a good solution or whether making arrangements with your creditors is a better approach. A reputable attorney will not advise bankruptcy where another option is preferable. If bankruptcy is a fit answer, they can then advise you on the best timing for your bankruptcy filing.
Contact Our Offices for a Free Consultation
To find out more about the debt-relief benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt today for a free consultation. Call +1-919-646-2654 now for a free appointment at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.