We often meet with clients who all have the same question: when is the right time to file bankruptcy? While there is technically no threshold amount of debt required to file bankruptcy, it is not a decision that should be made lightly. Filing a case when you don’t really need to could leave you without much needed recourse in the future if you find yourself in a difficult financial situation again.
Downsides to Filing Your Case at the Wrong Time
Filing a bankruptcy case at the wrong time, or when you don’t really need to, can have several negative impacts on your case, some as severe as barring you from receiving another bankruptcy discharge for several years. Another risk of filing a bankruptcy case without strategically timing it is filing before a debt qualifies for discharge. There are several types of priority and unsecured debts that may qualify for discharge depending upon the date your case is filed. It is important to strategically plan the filing date of your case to ensure you discharge as much of your outstanding debt as possible. Below is a helpful table that summarizes the impact that several filing events have on your future ability to discharge your debts:
Potential Negative Impact
Filing Your Case Too Early
Miss the Opportunity to Discharge Certain Debts, Such as Tax Debts, Because Not Enough Time Has Elapsed Before Filing.
Filing Your Case Too Early
Inability to Receive a Discharge Because Case Was Filed Too Closely in Time to a Previous Case.
Filing Your Case with Little Debt and Receiving a Discharge
Potential Bar from Receiving Another Bankruptcy Discharge within 3-7 Years.
Filing Your Case at The End of The Tax Year
You Could Potentially Lose a Large Portion of Your Tax Refund for the Year.
Filing Your Case Prior to The Resolution of Outstanding Litigation
You Could Potentially Lose Your Settlement from Any Outstanding Litigation at the Time of Filing Your Case.
These are only some of the major pitfalls that an unwary filer can easily fall into. As you can see, choosing the right time to file can often be a very calculated process. It is important to make sure that you either understand the impact of your chosen filing date or meet with a qualified bankruptcy attorney who can help you best strategize.
So, When is the Right Time to File?
Bankruptcy often has a snowball effect; you find behind on one bill and then things tend to spiral out of control from there. While this is not always the case, we always suggest that you reach out to a qualified bankruptcy attorney in your area sooner rather than later if you are in a difficult financial situation. Most bankruptcy attorneys will offer a free consultation for new clients and this is a great way to get critical insight on your case and when you might need to file. If you wait too long to address your debts, you risk creditors beginning legal proceedings against you. These proceedings can result in liens on your home/property or even wage garnishments that directly take a portion of your paycheck each pay period and pay it to the suing creditor.
It never hurts to get a professional opinion about your financial situation, the worst-case scenario is walking away with a better understanding of how to fix your financial woes or prevent future ones. If you or someone you know is facing financial difficulty, don’t hesitate to call us, we offer free consults to new clients and can even meet with you in your own home if you prefer. No matter your situation, Lifeline Legal can help get things back on track.