There are many factors to consider when deciding when you should file for bankruptcy. Here are a few common reasons for delaying or speeding up a bankruptcy filing.
Reasons to Delay a Bankruptcy Filing
Your income recently decreased. One good reason to delay a filing is if your income over the last six months puts you over the means test limit but a recent decrease in your income would put you under the limit if you waited a month or two to file. Remember, the means test is based on your average gross income received during the six-month period just prior to the month you file. So, if you file in October you would average your income during the months of April through September.
You face foreclosure but the sale is not yet scheduled. An impending foreclosure is another reason to delay you filing (or speed it up, see below). If the foreclosure sale hasn't been scheduled yet, you may want to delay your filing until the sale is both scheduled and close to taking place. This tactic will result in a delay of the sale for at least two months and sometimes longer, which will give you an extra couple of months of payment-free shelter.
Certain credit card use. Still another reason to delay filing is if you used a credit card within the previous 90 days or obtained cash advances within the previous 70 days. If the credit card charges totaled more than $550 on any one card and were for luxuries, or the advances on any one card exceeded $850, the creditor can obtain a court ruling that the charges or advances will not be discharged in your bankruptcy. If you have recent charges or cash advances that might survive your bankruptcy you should consider delaying your filing until the three month or 70-day period has expired.
Other reasons. Other common reasons you might want to delay filing are:
- you made preferential payments to creditors (wait 90 days or one year to file, depending on the type of creditor)
- you transferred property for less than fair value within the past two years and the property is valuable enough that the bankruptcy trustee may go after it (typically over $1,000)
- you had a previous bankruptcy case dismissed within the past year (or in some cases within the previous 180 days)
- you are seeking a mortgage modification (the bankruptcy may bring the modification process to a screeching halt)
- you are seeking to discharge back income taxes (wait until three years have passed since the taxes first became due or until two years have passed since you filed a return), or
- you filed a previous bankruptcy in which you obtained a discharge (wait until you are eligible to file again).
Reasons to Speed Up Your Bankruptcy Filing
Sometimes, you'll want to file for bankruptcy right away. If your income greatly increased during the last few months, but was much lower during the previous three or four months, the sooner you file the better your chance of passing the means test. Also, if your house is in foreclosure and the sale is scheduled and you want to delay the sale, you should file for bankruptcy immediately.
To learn more about choosing the right time to file for bankruptcy, see Nolo's article Should I File Bankruptcy Now or Wait? Or visit, Nolo's Bankruptcy Center for articles, FAQs, Legal Updates, books, and software on bankruptcy.