Bankruptcy Attorney | When Should You File Bankruptcy (Pt. 1)

Bankruptcy Attorney | If you have already decided that you need to file for bankruptcy, the next question you should ask yourself is “when?” While you might feel that you need to file ASAP, in some situations, it actually makes sense to wait a little bit before you file Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 and Chapter 13 Bankruptcy

Here’s a quick overview of Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy essentially allows you to wipe your financial slate clean without the worry of making “past due” amounts. A trustee liquidates your salable assets, thus allowing you to pay off your credits. Once that’s done, lenders shouldn’t be calling you to collect.

 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to reorganize your debt. You work with a bankruptcy attorney to set forth a plan to repay as much as your debt as possible during a 3-5 year period. You’ll be required by a bankruptcy court to provide detailed financial statements that support your proclaimed revenue and expenses. Once the plan is created you’ll have to make monthly payments to a trustee, who in turn pays off your creditors. Once you have completed the repayment plan, you are no longer responsible for any previous debts, even if through repayment, you were not required to pay the entire amount that was owed. Chapter 13 also stops increases on interest rates, such as the interest rate owed on a credit card.

Deciding on Chapter 7 or Chapter 13

Choosing between Chapter 13 and Chapter 7 bankruptcy is an important decision to make. Weighing both options with a bankruptcy attorney will help you decide which way to file. Also, to help your attorney help you to make the best decision, it’s necessary you provide them with accurate information regarding your finances. It’s also important to remember that some debt is not able to be discharged under either type of bankruptcy. These debts include: student loans, alimony, and child support. Working with a bankruptcy lawyer is the best way to determine if you are eligible to file.

Timing

When people file too early without considering all other options, it can mean losing property, or also mean having to file for Chapter 13 instead of Chapter 7. There are even some ways to avoid having to file for bankruptcy. You’ll want to consider some things and consider when it might be time to pump the brakes on your bankruptcy.

Avoiding Foreclosure

It’s not uncommon for people to file for bankruptcy in order to avoid being foreclosed on. This can be a good solution to the situation, but when you file too early, it can make it difficult to get a modification to your mortgage. This is because most lenders refuse to offer modifications if you have entered bankruptcy, due to the fact that a bankruptcy cancels the promissory note part of your mortgage (but not the lien on the house). As a result, there is nothing for you to negotiate with. If you are considering a mortgage modification, or have found out that you might be eligible for one, avoid filing for bankruptcy.

Recent Income Too High

Once you file for Chapter 7 bankruptcy, the court reviews the previous six months of income in order to determine your eligibility. This is called a “means test.” If your income is too high, a court will typically only allow you file for Chapter 13 bankruptcy, which requires that you repay a portion of your debts.

If a pay cut or loss of job has caused your income to dip, or you see that happening in the foreseeable future, you might want to consider waiting to file for bankruptcy. This decrease in income might allow you to be eligible for Chapter 7.

Property

Filing a Chapter 7 bankruptcy means you lose your property. Waiting might mean that you save this property, or at least have time to sell it to use the proceeds to pay down your debt.

Some examples:

  • You are expecting a tax refund of $4,000. If you file bankruptcy before you receive it, you will have to surrender it. If you wait, you can use it to pay down some of your bills.
  • Consider depreciation values, such as with cars. Say your car is worth $6,000, but your state bankruptcy exception laws only allow you to keep a car that has a value of $5,500. Waiting a few months could mean you get to keep your car. – Simon Resnik

Specializing in bankruptcy and foreclosure law for over 20 years. Call attorney David Pinkston for a free consultation today: (904) 389-5880. #FloridaBankruptcyAttorney #FloridaBankruptcy

If you are thinking about #bankruptcy or #foreclosure in the Jacksonville, Florida area, you should call attorney David Pinkston. David is very experienced with all aspects of bankruptcy law yet very personable and easy to talk to. Call Us Today! (904) 389-5880