Timing is Everything: How Do You Know When to File for Bankruptcy

How Do You Know When to File for Bankruptcy

For most people, filing for bankruptcy is a last resort. It happens when it needs to happen. Unfortunately, this backs people into a corner. The risk of something going wrong when you have no choice about when to file is higher. For some people, this means a worst-case scenario: their bankruptcy case is dismissed because of the timing of when they filed

It’s easy to see why it’s so important to take control of your financial situation so you have some say over when to file for bankruptcy.

What Should You Know About the Timing of Filing for Bankruptcy?

First, you need to consider which chapter bankruptcy you intend to use. Chapter 7 bankruptcy offers the discharge of your debts within a few months in exchange for the liquidation of many of your assets. Chapter 13 takes years to complete and your debts aren’t completely discharged, but you get to keep many of the assets you would lose if you file for Chapter 7.

In addition to the basic differences between the chapters, there are also differences regarding when you can file for each chapter, especially if this is not your first bankruptcy. You and your bankruptcy attorney can discuss the qualifications for each chapter and determine how to proceed based on your specific circumstances.

One of the most important factors when it comes to the chapter of bankruptcy you choose has to do with income. Chapter 13 bankruptcy, sometimes called “wage earners’ bankruptcy,” requires monthly payments toward your debts. Unless you have an income you will not qualify for Chapter 13.

Now, Chapter 13 is a great option because it allows you to retain ownership of many of the assets you’d lose in Chapter 7. But the downside is you don’t get relief as quickly from your debts and many of your debts won’t be discharged in the end. And while Chapter 13 is the best option for many, if you aren’t sure what’s on the horizon as far as income is concerned, it might be better to wait until you qualify for Chapter 7.

Discussing your income situation with your attorney and considering whether or not you expect it to change in the coming months is an important part of choosing the right chapter of bankruptcy. Sometimes waiting a month or two can result in a much better opportunity to use bankruptcy to deal with your debts.

Bankruptcy’s Effect on Your Credit Score

Another consideration when it comes to timing and filing for bankruptcy is your credit score. It’s no secret that bankruptcy will lower your credit score. People are willing to take this hit because it’s better than the damage that long-term financial problems cause. Bankruptcy also allows you to start fresh. Your credit takes a hit when you file but you can immediately begin rebuilding your score.

It’s important to keep this in mind when choosing when to file. If there is a reason why you’d want to keep a bankruptcy from showing up on your credit score in the immediate future, it might be better to wait a few weeks or months and time when you file based on the other events in your life.

How Do You Know When to File for Bankruptcy?

Determining when you should file for bankruptcy and deciding if now is the best time is a difficult decision. It’s a personal choice and what’s right varies from case to case. This is one of the reasons it’s so important to discuss your situation with a bankruptcy attorney.

For more information or to find out whether now is the best time to file for bankruptcy, R. Flay Cabiness, II, P.C. at (912) 554-3774 (Brunswick, GA); (912) 375-5620 (Hazlehurst, GA) or; (912) 554-3756 (Jesup, GA) to schedule a consultation.