W is for Wait in my Bankruptcy Alphabet.
As in “Wait! Wait! Don’t file yet.”
Timing a bankruptcy can be critical.
Sometimes, the bankruptcy journey begins, not with a mad dash to the courthouse, but with a short wait.
Having made the decision to get out of debt, why would you wait?
Many reasons, most of which revolve around how much of your assets you get to keep, or how much trouble you can avoid by letting time pass before filing.
Reasons to wait to file bankruptcy:
- Put time between you and heavy use of credit cards
- Allow taxes to age to point of dischargeability
- Let preferential transfers to insiders become a non issue
- Take time to maximize exemptions
- Wait out the end of the tax year to include current year in Chapter 13
Sometimes, the issue is the running of time between an event in your financial past and the bankruptcy filing.
Transfers to ordinary creditors can be recaptured by the bankruptcy trustee if made within 90 days of the filing. The recapture period is one year, if the transfer is to a family member.
Taxes assessed within 240 days of filing bankruptcy are non dischargeable; you don’t want to file until at least 241 days have passed.
In other circumstances, you need time to gather facts, spend money, open new accounts, terminate automatic transfers.
Non bankruptcy deadlines
Some other deadlines operate independently of the bankruptcy filing.
- The statute of limitations determines when a debt is no longer collectable; wait out the statute and the debt can be excluded from the Chapter 13 debt limits.
- Taxes are due the first day of the new year, even though the return isn’t due until April 15th. You may want the taxes to be a debt to be paid through the Chapter 13 debt limits.
There are times when waiting has a greater cost than you can afford: the foreclosure looms, the car may be repossessed, or your wages are being garnished.
Good bankruptcy counsel can spot the pro’s and con’s in the timing issues. Don’t wait to consult an experienced bankruptcy attorney.
This message has been brought to you by the letter W.
My writing partner Jay Fleischman maintains W is for Wage.
Image courtesy of Leo Reynolds.