Should I file bankruptcy right now or wait?

There are some strategic considerations to think about when determining whether to file a bankruptcy right now or to wait until some point in the future.  There is no “one size fits all” answer in bankruptcy. Despite there likely being similarities between cases, each client is unique.

Here are some general rules of thumb to help analyze the pros and cons regarding the timing of your bankruptcy filing.

• About to get married?
  • If you are about to get married and have a significant amount of unsecured debt in your name, you might want to consider filing bankruptcy before getting married. Couples often fight about debt, and so the less debt you can bring to the marriage, the less fighting about debt there is likely to be.
• About to get divorced?
  • If you’re separated and/or about to get divorced, you might want to consider bankruptcy right now. Again, couples often fight about debt during married and it’s no different when heading toward divorce. Sometimes it makes sense for the couple to file for bankruptcy while they’re still married to allow each to go his/her separate way without the burden of the debt, especially if there is joint debt. Also, filing bankruptcy before divorce often helps ease the decisions later about who is going to pay what debt from the marriage … if the debt has been eliminated then there’s less to argue about.
• About to have surgery?
  • If you’re about to have a surgery or know you’re going to need surgery within the next six months, you might want to wait to file bankruptcy because there might be significant medical bills associated with the anticipated surgery. If you file bankruptcy first and then have significant medical bills later you’ll be on the hook for those medical bills.
• About to have a child?
  • If you are about to have a child, you might want to wait to file bankruptcy until after the child is born. There could be medical bills associated with the birth or soon thereafter, but you might also benefit on the Means Test and in your budget by having an additional dependent in your family.
• Just lost a job?
  • If you’ve just lost a job where you were making good money it might make sense to file a bankruptcy before you find another job because you might be in a better position right now to file for Chapter 7 bankruptcy even if your Means Test shows a “presumption of abuse” due to your last six months of income being higher than the threshold for your family size. This can be especially true if you really have no solid prospects for other work any time soon.
• Just got a job?
  • If you just got a job, you might want to file bankruptcy right now before your judgment creditors find out you’ve got the job. If a judgment creditor finds out you have a job it might try to garnish your wages right away.
• Big tax refunds not received yet?
  • If you’ve filed your tax returns and know you are entitled to a large refund (say more than $1,000) then you might consider waiting to file for bankruptcy until after you’ve received your refunds and have spent the money down on living expenses. This would be especially true if you have no, or not sufficient, bankruptcy exemptions to keep the tax refunds otherwise.
• Facing a garnishment?
  • If a creditor has a judgment against you it can start trying to garnish your wages and or bank accounts to satisfy that judgment. A general rule of thumb is that a creditor can garnish 25% of your “Gross minus taxes” wages amount and up to 100% of the money in your bankruptcy. Under these circumstances, it’s often better to file bankruptcy sooner rather than later.
• Facing a lawsuit?
  • If a creditor has filed a lawsuit against you, you might consider filing bankruptcy sooner rather than later. This is because if the creditor gets a judgment against you, that judgement would become an automatic lien against any real estate you have in the county where the judgment was entered. Also, there is the garnishment issue too once a judgment is obtained.
• Facing foreclosure?
  • If you are facing a foreclosure and want to try to save the home, you would need to file a bankruptcy (Chapter 13 usually) to be able to stop the foreclosure sale. Once a foreclosure sale happens, a bankruptcy won’t help you save the home.
• Expecting a worker’s compensation settlement, personal injury recovery, insurance settlement or an inheritance?
  • If you’re expecting some kind of settlement, recovery, or inheritance soon then you might consider waiting to file for bankruptcy. This is especially true if you think you are entitled to a large amount of money or valuable property (real estate, vehicles, jewelry, etc.).  There are some instances where there is a great deal of uncertainty as to whether you’ll receive any type of settlement or recovery on any given claim you have against others, and in those instances it might make sense to just go forward with a bankruptcy anyway, with the understanding that you wouldn’t likely get to keep any of the proceeds if later there is a settlement or recovery or inheritance.

If you’re not certain whether you should file bankruptcy right now or wait please speak with one of our experience attorneys. Call 913-422-0909 to make a consultation with one of our attorneys. We’re here to help.