Bankruptcy is a tool to be used strategically. Part of the reason you should consult with a bankruptcy lawyer is precisely to work out that strategy. A smart bankruptcy is timed judiciously; you don't want to wait until it is too late and you have lost too much, but you also don't want to file if waiting a little is to your benefit.
A good bankruptcy attorney will review your situation and help you decide if the time is right. Because so many people view bankruptcy as the ultimate stigma, they wait too long to fileâ€•until they've suffered unreasonably long or lost too much in the battle with debt. If you are considering bankruptcy seriously, chances are the time is right. Actually, it was probably right quite some time ago. Nevertheless, some financial circumstances or life situations call for postponing bankruptcy until the best moment.
One important consideration is maximizing your exemptions. If you are expecting a considerable tax return, you should probably wait to file until after you have received the refund. When you get the money, you can use it toward essentials that will be exempted and then file; if you file before you get the return, it will be put to use toward your debts.
Another consideration is anticipated debt. If you are facing some serious medical bills in the future, you may want to wait to file until after that happens. You will not be able to file a Chapter 7 for another eight years, four for a Chapter 13, so if you get in over your head you may be out of luck. You should time your bankruptcy so that you can get the maximum protection; sometimes you have to wait to ensure that you will be able to discharge all credit purchases and as much tax as possible.
Certain recent activities on your part can count against you in the process, so if you've engaged in them you may consider delaying your filing. One example of this is if you have recently repaid considerable personal debts owed to family members or friends. A trustee can recover this money from your family members or friends, and you surely want your loved ones to hold on to that money. You also want to delay filing if you have recently acquired a large amount of debt or have purchased luxury items. For the former, your creditors may be able to prevent you from eliminating those recent debts by claiming fraud; for the latter, the trustee may be able to set the purchases aside. If you transfer property fraudulently or to avoid handing it over to creditors too close to the bankruptcy, the trustee can set these aside or the court may dismiss your case.
You may also want to wait to file until you can pass the Means Test. Because the Test is based on your average income over a six month period, a month or two of greatly reduced income may allow you to pass where a big paycheck didn't. That doesn't mean you should go out and quit your job! However, if you have lost your job recently but wouldn't pass the Means Test right away because of a large paycheck, delaying the filing might be a good idea.
Think over your options carefully, but don't wait too long or take stabs in the dark. If you're unsure about your circumstances, you should consult with a bankruptcy attorney to strategize the timing of your bankruptcy so that you can get the maximum protection filing can afford. Raleigh bankruptcy attorney John T. Orcutt has helped thousands of families plan for bankruptcy. If you are in North Carolina, call our office today to set up a free initial consultation. Offices in Raleigh, Durham, Wilson and Fayetteville.