30 Mar New Bankruptcy Laws: File By The End Of The Month or Start All Over! Part 2 of 2.
In my last blog, I touched on how Bankruptcy was a “snapshot” in time wherein all information on the bankruptcy petition must be accurate as of the date your bankruptcy petition is actually filed. In this blog, the ramifications of filing a month later is explored. We take the example of filing in April 08 instead of March 08.
To start, the means test must now drop September, and pick up March. To the accountant at the law firm, that means recomputing the average income for a new 6 month period, while the attorney then redoes the 8 page form 22A or 22C means test. So new paystubs, profit and loss statements, and bank statements must be produced. Interest income needs to be recomputed. Likewise, rental income, support income, disability, retirement, etc. all must be recomputed.
And it doesn’t just end there. In completing the test, new amounts for secured debts need to be updated, as well as new deductions for taxes, insurance, priority debts, etc. If your car was paid off or a foreclosure took place between those two dates, a lower deduction on the means test would ensue, and may even result in you not passing! So technically a 1 second delay between the months ticking might deny you the bankruptcy relief you were seeking!
To make matters worse, income is only one small part of the bankruptcy petition processing equation concerning timing. Consider the following:
Credit Counseling: This is good for only 6 months. So if you retained your attorney and went on a payment plan prior to filing, yet did your credit counseling immediately, you may need to take it all over again if it hits the 6 month expiration.
Tax Return: A monthly delay in filing might result in the wrong tax return being supplied.
Exemptions: The assets you keep depend upon where you resided 2 to 2.5 years ago. If the delay in filing changes your exemptions from one state to another, you may only end up protecting significantly less assets.
Credit Reporting: If you were up to date on your bills and were going to file without being late at all, any delay in filing to the following month might put 30 day lates on the credit report, which will now result in a lower credit score as opposed to having solely a bankruptcy on the credit report and with no lates.
So failing to file as planned can result in serious consequences as noted above. The typical amount of time spent to update to a new months filing is 2 to 4 hours to the law firm. The time for you to update all the information on the previously prepared bankruptcy and produce evidence of the same likewise will be several hours. And don’t expect all this to be free. Typically, most attorneys will charge $200 to $1000 to completely redo and update a petition once the new month ticks!
As all the Bankruptcy Courts across America will affirm, the forgoing is why very few cases are filed at the beginning of any month, and most cases are filed towards the end. Many firms will typically have 2 filing dates: the middle of the month and the end of the month. Very few firms file any cases at the beginning of the month. Its just too hard for the client the law firm to jump through all Congress’ new hoops and produce an accurate petition with all the substantiating documents.
So what do you do? Make sure you file as planned and agreed. Get all documents that your attorney needs on the date requested and without any delay. Abide by the time frames originally agreed to. Show up to your signing appointment.
In the long run, it simply makes no sense to pay more money and waste you and your attorneys time to delay your filing if you do not need to.
Written by Michael G. Doan
Bankruptcy Law Network (BLN)
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