Many people who choose bankruptcy to resolve their debts have waited too long. In some cases, that delay means specific, concrete losses: a vehicle repossessed, wages garnished, a mortgage foreclosed. Even when the cost isn’t quite as clear, though, most pay a price for waiting. Stress takes a toll on quality of life, health, relationships, and even job performance. And, juggling debt typically means pouring a lot of money into interest and late fees without gaining much ground–money that’s wasted if and when the debtor ultimately files for bankruptcy.
In short, there are many reasons to act quickly when you’re overwhelmed by debt, and there are risks associated with delay. But, the opposite is true, too. Sometimes, filing bankruptcy too quickly or at the wrong time diminishes its benefits, or even makes it impossible to successfully complete a case. Here are some reasons it is beneficial for some people to delay a bankruptcy filing.
You’ve received a discharge in a prior bankruptcy case
If you’re looking to receive a discharge in your bankruptcy case, there’s a statutory waiting period between the filing of a case in which you received a discharge and the filing of a new case that is eligible to end in discharge. This is most critical for Chapter 7 cases, since the discharge is the goal of the bankruptcy. It may be less important in a Chapter 13 case, since the debtor gets other benefits under a Chapter 13 repayment plan. But, if there’s no reason to rush, it’s worth checking the dates and determining whether it makes sense to hold off until you’ll be eligible for a discharge.
You’ve just given away property, or sold it at less than fair market value
Circumstances can change quickly, and that may mean that not long before you started considering bankruptcy, you gave a relative a used car or sold your boat to a friend for what it cost you, though the market value is much higher. In either case, the bankruptcy trustee may be able to “unwind” that transfer and take the property back from your friend or relative. This can be a messy process, especially if the property has been transferred again.
You recently purchased a home
Nevada has a very generous homestead exemption compared with the federal exemption and the exemptions allowed in many other states. But, the U.S. Bankruptcy Code limits that exemption if the home was purchased during the 1,215 days (about 3 ⅓ years) leading up to the filing of the bankruptcy petition. So, people who have purchased a home during that period and have equity in excess of the federal exemption limit sometimes opt to hold off on filing until the 1,215-day window closes.
You’ve recently financed a motor vehicle
The timing of your vehicle purchase won’t matter if you’re filing under Chapter 7, but some people who have purchased automobiles on credit choose to delay filing Chapter 13 bankruptcy to ensure that 910 days (about 2 ½ years) have passed since the purchase. That’s because a process known as a “cramdown” can save a Chapter 13 filer thousands of dollars on his or her car loan, but only if the petition is filed outside the 910-day window.
You owe tax debt that isn’t yet eligible for discharge
Many people believe that tax debt isn’t dischargeable in bankruptcy, but the truth is a bit more complicated. Some types of tax debt are subject to discharge, but only if specific conditions are met. One of those conditions is the passage of time. So, in some cases, your filing date will determine whether or not you can discharge outstanding debt to the Internal Revenue Service (IRS).
You’ve recently moved to a state with more favorable exemptions
Understandably, the legislature does not want people relocating simply to take advantage of more generous bankruptcy exemptions in another state. That’s why you must generally live in a state for two years before you can apply that state’s exemptions in your bankruptcy case. So, for some people it makes sense to wait out that time period. Note, though, that the opposite may also be true. If the old state’s exemptions are more beneficial, it may warrant filing before that period expires.
Speak with an Experienced Attorney Before You Delay Filing Bankruptcy
These are just a few of the most common reasons some people choose to delay a bankruptcy filing. But, the analysis can be tricky. While there are clear benefits to delay in some cases, there are also risks. For instance, someone facing foreclosure and hoping to save the home through a Chapter 13 bankruptcy plan might opt to file right away and gain the protection of the automatic stay, even though it might mean that he or she wouldn’t be eligible for a discharge of unsecured debt or would be unable to reduce the outstanding balance on a car loan.
Choosing the best time to file requires careful consideration of all of the variables impacted by timing, and weighing in your priorities. Focusing on one issue while overlooking another can lead to serious mistakes. That’s why it’s important to talk with an experienced Las Vegas bankruptcy attorney as early in your decision-making process as possible. The attorney can help ensure that you are aware of all of the relevant considerations and have considered the pros and cons of moving forward versus waiting. A knowledgeable attorney can also help calculate the relevant time periods to ensure that you don’t miss any deadlines or file prematurely.
To learn more about your options and how to determine the best time for filing in your specific circumstances, schedule a free consultation with one of the experienced bankruptcy lawyers at Freedom Law Firm. Just call 702-903-1459 or fill out the contact form on this site.