Timing Considerations Prior to Filing Bankruptcy Text Size:

One of the most important considerations is timing: When is the right time to file for bankruptcy? There are several advantages to filing quickly, particularly when creditors are knocking at your door. But, there are just as many reasons to take it slow.

Reasons to File Quickly

Sometimes, it's better to file for bankruptcy immediately. Keep in mind that you must receive the required credit counseling briefing within 180 days prior to filing your petition for bankruptcy.

Prompt filing might be necessary if:

• You urgently need the automatic stay to stop collection and repossession activities, utility shut-offs and any state court proceedings against you
• You plan on acquiring nonexempt property some time after the filing date. Filing immediately protects it from the reach of creditors because it isn't in your possession at the time

Timing of Certain Transfers

A prime reason to delay a bankruptcy filing is that it might affect certain transfers made and may affect your overall petition. For instance, if you transfer property and then, soon after, file a petition for bankruptcy, a bankruptcy trustee can set aside or void these transfers. The amount of time that has past between transferring property is important!

The trustee can set aside or void the following transfers if you file too soon:

• You intentionally transferred, destroyed, or mutilated property within one year of the filing to defraud creditors
• You made payments to one some creditors but not other within a prescribed time period
• You fraudulently transferred property within two years of the bankruptcy filing
• You purchased luxury goods and services within 90 days of filing for bankruptcy

On the other hand, some transfers may favor a quick filing for bankruptcy in order to set them aside; so long as the transfers were:

• Involuntary
• You didn't hide or conceal the property
• The property was already exempt
• The transfers were made within the right time periods not to affect the filing or cancelling of debts

Other Reasons to Delay Filing

Other than timing transfers correctly, there are other reasons to delay filing for bankruptcy, such as:

• If you anticipate additional debt, such as medical bills or other necessities, you should wait until after you have incurred the debt so that it can be included in the discharge order
• You want to make sure that the creditors for certain debts get paid. For example, debts with friends. But, be sure to wait long enough so that a trustee cannot set them aside
• Delay filing the petition until the foreclosure of your home is imminent or until you are near to being evicted because the bankruptcy's automatic stay will stop the foreclosure and the eviction
• Delay filing for sufficient time to ensure that all credit card charges can be discharged
• Delay filing for sufficient time to maximize the amount of taxes that can be discharged
• Delay filing under Chapter 13 in order to obtain more favorable treatment on certain secured debts

Exemption Planning

Taking some time to maximize the amount of property that can be claimed as exempt will help your legal and financial position. This can also reduce the amount of property that the trustee will take to pay creditors. These exemption tips should help:

• Filing a homestead deed in order to claim the state homestead exemption, if eligible
• Purchase household goods, clothing, life insurance and other exempt items up to state exemption limits
• If you have nonexempt equity in your home, you may want to obtain a second mortgage in the amount of that equity and use the money to purchase exempt property
• If you plan to receive a tax refund, wait until you received the check and spend the money on exempt assets
• If you anticipate acquiring property by a will, inheritance, divorce property settlement or life insurance as a beneficiary, it may be advisable to temporarily change those provisions or to rearrange the marital settlement so that the property cannot be considered as part of your nonexempt assets

Questions for Your Attorney

• Will filing for bankruptcy prevent the utilities from shutting off my service?
• Should I file for bankruptcy if I recently purchased an expensive new car?
• Should I wait until I undergo major surgery before filing for bankruptcy?

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