Right Time to File for Bankruptcy

Making the decision to file bankruptcy is never easy. For those who have made the decision, it is often to relieve the financial stress and get a fresh start. Many may be facing bankruptcy due to no fault of their own, such as the death of a spouse or loss of employment. It is important, however, to time the filing of your bankruptcy properly as timing could affect the outcome of your case.

Delay if Mortgage Modification is Possible

Filing Bankruptcy Miami can delay foreclosure on your home, but if you file too soon, you may lose the opportunity to obtain a mortgage modification. Bankruptcy cancels the promissory portion of your mortgage, but does not remove the lien from your home. Therefore, a lender has nothing to negotiate once a bankruptcy is filed. In some cases a lender may refuse to enter into mortgage modification once bankruptcy is filed.

Delay if Your Recent Income is High

If you have worked overtime in the past few months or have just recently lost your job, it may be best to delay filing until your average income is lower. The courts will review six months of income to determine eligibility, so it is best to wait until you are sure your income will be low enough to qualify you.

Delay if You Expect a Financial Windfall

If you are expecting an annual bonus at work or a tax refund, it is best to get the funds and use them toward necessities before filing. If you file bankruptcy and then receive the bonus or refund, you must surrender it to the bankruptcy trustee. However, it is important to use the funds for necessities rather than frivolously to avoid having your bankruptcy dismissed.

File Immediately if you are Facing Loss of Assets

Filing for bankruptcy automatically stops creditors from continuing collection efforts, even in the case of mortgages or car loans. Filing Chapter 7 bankruptcy only provides temporary relief, while Chapter 13 bankruptcy may allow you to catch up on missed payments through your payment plan. In Chapter 13, you may be able to get a repossessed car back if it has not been sold, but once it is sold, bankruptcy will not help. Therefore, if you are facing a sheriff’s sale of your home or the sale date for your vehicle is approaching, filing bankruptcy prior to the sale can help protect your assets.

File Immediately if You are Sued

If you are facing a lawsuit, filing for bankruptcy can stop legal proceedings against you. If the obligation is discharged through your bankruptcy, the lawsuit will be dismissed and the judgment unenforceable. However, a bankruptcy will not remove liens from your property automatically. If a creditor has filed a lien against your property, you may need to take additional steps to have it removed, and, in some states, it cannot be removed at all. Therefore, it is critical to discuss your options with a bankruptcy attorney if you receive lawsuit documents from a creditor.

Although each case must be reviewed on an individual basis, these are common situations that can help you determine whether you should file for bankruptcy immediately or if waiting to file is more beneficial.