Now or Later: When Should I File Chapter 7 Bankruptcy?

financial stress

While there are a number of benefits to filing Chapter 7 bankruptcy early, there are circumstances when it might be better to wait. Here are some examples of when to file and when to wait.

Why Should I File Bankruptcy Now?

  • Filing Chapter 7 will immediately put a hold on any pending home foreclosure. Think about filing soon if your house is in jeopardy.
  • If you can’t get through a day without the headache of constant collection calls, consider filing now to shut them up. Once you file Chapter 7, the phone calls are legally forced to stop.
  • The entire process, from the moment you file all the way to the end, may only take about three to six months. A benefit of filing early is that you get your financial freedom earlier.
  • If you’ve been thinking about filing bankruptcy, but haven’t yet because you’re nervous or scared, contact a lawyer now to find out if bankruptcy is the best solution for your situation. Our clients leave our office feeling lighter, smarter and more secure about their financial futures.

Why Should I Wait to File Bankruptcy?

  • Filing bankruptcy puts a hold on foreclosures, but some people file too early. If you are in the process of modifying a mortgage, or want to modify, then it may be a good idea to hold off on filing. Once you file, these negotiations will likely be over.
  • The bankruptcy means test, which determines if you are eligible to file, may decide your income is enough to repay some or all of your debts through a Chapter 13 repayment plan. However, the test usually just looks at the average of your income over the past six months. If you were recently laid off or took a pay cut, wait a few months to get that six month average down a little so you qualify for Chapter 7.
  • If you are about to incur more big ticket expenses, it’s probably better to wait. For example, if you are about to have expensive surgery, and will be required to pay some of it yourself, waiting to file until after surgery may get those expenses discharged as well. However, if you rack up a lot of credit card debt on unnecessary items prior to filing, the court may view those charges as fraudulent and accuse you of never intending to repay them. Those debts could stay with you after bankruptcy or even sometimes be grounds for dismissal of the bankruptcy all together. Consult an attorney if you expect to have new debts before filing Chapter 7 bankruptcy.

There are a ton of benefits to filing bankruptcy. There aren’t many debts that are exempt from Chapter 7 discharge, so you could potentially free yourself from a many forms of debt. You should talk to a bankruptcy lawyer so they can help you decide the best time to file so that you get the most benefit.

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