Planning for Bankruptcy – When should I file? – First of a series

07 Oct Planning for Bankruptcy – When should I file? – First of a series

Most people want to file their bankruptcy case right away. That’s not always the best idea. Why? There can be many reasons, but good or bad timing of filing a bankruptcy casecan make a difference.

Means Testing

The means test looks at your average income during the past six months.

  • If you received a bonus or an unusual item of income during the past six months, it might pay you to wait a month or two so this sort of item is not included in your average “current monthly income.”
  • If your overall budget does not show that you could pay money to your creditors in a chapter 13 plan, you might be able to file a chapter 7 case and avoid being under court supervision for up to 5 years.

Things are going to be bad for a while

If you are out of a job and can’t find work, and you don’t have assets anyway, there’s no rush to file a bankruptcy case.

  • You are essentially judgment proof and things might get worse before they get better.
  • Maybe the time to file your bankruptcy case is when you start to see the light at the end of the tunnel.

You moved or are planning to move

Exemptions might make a difference.

  • If you moved from one state to another, the date on which you made the move could make the difference between selecting one state’s generous exemptions and another state’s less generous exemptions. This is a complex topic which I’ll cover in a future blog entry.

You need to plan your exemptions

You might be able to plan your assets in such a way as to make it less likely that a trustee sell your stuff to pay your creditors.

  • This is tricky and requires legal attention. And it’s the topic of another blog which will appear here soon.

Conclusion

If you’re considering filing a bankruptcy case, ask your attorney when the timing is right.

Lakelaw represents people and small businesses in bankruptcy cases in Illinois and Wisconsin with offices in Chicago, Skokie, Waukegan and Kenosha.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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