Reasons Not to Delay Filing Bankruptcy

The decision to file for bankruptcy is not one that should be taken lightly. However, there are some circumstances that warrant filing a petition as quickly as possible. Read on to find out about some of the most common reasons for Filing Bankruptcy sooner rather than later.

Bank Foreclosures

In some cases, filing for bankruptcy can help homeowners facing foreclosure stay in their houses. Once debtors file their petitions, an automatic stay will be placed to prevent the foreclosure proceedings from moving forward.

It’s important to note here that only Chapter 13 bankruptcy has a provision for allowing homeowners to stay in their houses long-term. Filing for Chapter 7 will place a temporary stay on the foreclosure proceedings, but the property will be sold to help pay off creditors. Whether homeowners plan to file for Chapter 13 or Chapter 7, they should do so before the foreclosure ends.

Car Repossession

Both Chapter 13 and Chapter 7 may allow drivers to recover vehicles that have been recently repossessed. That said, it’s best to file for bankruptcy before the lender repossesses the car.

The same automatic stay that applies to foreclosures will also put a temporary halt to repossession proceedings. In most cases, drivers will be able to retain their vehicles.

Starting a Higher-Paying Job

Those who want to file for Chapter 7 bankruptcy will need to pass what’s known as a means test. They’ll have to provide information about their income, assets, and debt to the bankruptcy trustee and their creditors. The means test looks at a debtor’s average income over the past six months, which means filing sooner rather than later after getting a better-paying job may improve a filer’s chances of having his or her petition approved.

Moving Out of State

Every state has its own list of bankruptcy exemptions. Those planning to move to a new state soon should check the local laws.

If the new state has fewer or less favourable exemptions, it may make sense to file for bankruptcy before or directly after the move. In most cases, filers who have moved recently will follow their old states’ exemption laws, but only if they act fast.

Anticipation of Receiving Property

In most cases, debtors can retain ownership of property received after filing for bankruptcy. There are, however, a few exceptions. If the court approves a filer’s bankruptcy petition, he or she will need to report lottery winnings and inheritances for up to 180 days after the filing date.

Facing a Lawsuit

Filing for bankruptcy can stop lawsuits filed for things like medical and credit card debt, accident damages, and breaches of contract. It’s usually more affordable to have the debt discharged as soon as possible than it is to pay to defend against these types of lawsuits. Just keep in mind that bankruptcy doesn’t stop all lawsuits and speak with a lawyer before filing a petition.

The Bottom Line

In most cases, debtors choose to delay bankruptcy filings until they have no other options. While taking a wait-and-see approach is usually the best approach, it doesn’t always benefit debtors. People who find themselves in one of the situations described above are better off taking action immediately.