When it comes to filing for bankruptcy, timing is everything. Many times, debtors will wait too long or jump too quickly into filing for bankruptcy.
If a debtor is in a situation where he or she is considering filing for bankruptcy, an experienced attorney can advise him or her on the best time to make the jump.
Debt is a problem for so many Floridians, but not everyone is struggling with debt so seriously that bankruptcy is the right solution. Debtors are encouraged to look at their financial situation and answer the following questions before making a decision.
• Is the debtor struggling to be able to make only minimum payments on credit cards?
• Is the debtor receiving continuous phone calls from creditors or debt collectors?
• Is the debtor using credit cards to pay for life necessities?
• Is the debtor even aware of how much money he or she owes?
• Is debt consolidation being considered as a solution by the debtor?
• Is the debtor afraid to review his or her financial situation?
If the answer to two or more of these questions is “yes,” it may be time for him or her to meet with a bankruptcy attorney to discuss the situation and see if filing for bankruptcy is the best choice of action.
Debtors will many times file for bankruptcy as a way to delay foreclosure proceedings on their homes. While this solution is an acceptable one, sometimes lenders will be willing to work with the debtor to avoid foreclosure and will modify the mortgage obligation.
Once bankruptcy is filed, odds are the lenders will be less likely to continue to negotiate over the terms of the mortgage.
If the debtor is pursuing Chapter 7 bankruptcy, the court will look at his or her income over the previous six months. This review is to determine if the filer is eligible under what is called the “means test.”
If the court considers the income too high, the debtor may only be able to file for Chapter 13 bankruptcy. If the debtor has had a recent cut in income or has recently been laid off, he or she may want to wait a few months so that the debtor qualifies per the “means test.”
The debtor may have a fear that he or she will lose certain items of property if a Chapter 7 bankruptcy is filed. One example is if he or she anticipates receive a large tax refund. If this is received during bankruptcy, the debtor will need to surrender it to the bankruptcy trustee.
If the debtor waits to file, he or she could use this money to pay for living expenses and hold off on filing for bankruptcy once it is all used. This method would not be considered concealing the assets but rather using it to live until bankruptcy could be filed.
If the debtor uses it to buy a yacht or something extravagant, the trustee may see it differently, but if the money is used to pay so that the debtor can continue to make house payments, it may be forgiven.
If the debtor foresees having to incur significant debts or expenses in the near future, it is advisable that he or she hold off on filing for bankruptcy. Chapter 7 bankruptcy will only erase debts that the debtor had at the date of filing.
Anything that happens later stays with the debtor. This means if the debtor sees some medical procedure needing to happen in the near future, it may be advisable to wait on filing until a few months after the procedure is completed and all of the bills have been processed.
These questions are only a handful of what considerations should be made before proceeding to file for bankruptcy.
It is advisable that a debtor who is in the middle of a tough financial situation and is considering bankruptcy consult with an experienced bankruptcy attorney before making any final decisions. The attorney can ask the right questions and review the debtor’s life situation to see if it is best to wait or if the time is right to file.