Yes, even bankruptcy attorneys admit there are certain times when those in debt shouldn’t file for bankruptcy. There have been many occasions where clients have entered my office with the belief that they should file for bankruptcy immediately and after examining their case, I decided that bankruptcy should wait, if done at all.
Let’s first examine some scenarios where debtors have to wait to file. There are a few things you shouldn’t do before applying. If you’ve done any of those things, then you’ll almost certainly have to wait to apply. These include:
* Using your credit card with 90 day filing
* Withdraw credit card advances within 90 days of submission
* Pay debts to family members or friends within one year of filing
* Give away, or sell a property below fair market value to anyone within two years of filing
While the implications of archiving when doing any of these things vary and depend on the facts of your case, it is important to note that it is best to avoid archiving after one of these events. It may be necessary to file in any case, as you may be facing foreclosure; however in such an event, the debtor should weigh the loss of the home in foreclosure versus the possible consequences of your bankruptcy case waiting to file.
Another common scenario where a debtor has to wait before filing is when the debtor has the potential to lose assets by filing too soon. Examples of assets that could potentially be lost to a debtor after filing include:
* Inheritance
* Personal injury suit
*Tax refund
* Account receivable
While the debtor’s ability to retain these assets will depend on many factors, including which chapter the debtor filed for and how much of the debtor’s assets are allowed to be released, the important thing to take is that important date in bankruptcy. . Therefore, if a debtor is threatened with losing one of these assets, then he needs to examine whether it is better to apply now or wait for the debtor to use the property before submitting it.
Another big reason a debtor might want to wait before filing is because the debtor may have income tax debt that could potentially be paid off if the debtor waits to file. Income tax can be exempted in certain circumstances. Therefore, a debtor who may not need immediate protection may find that waiting another six weeks to file allows him to pay off several years of income tax debt.
In addition, debtors may face the possibility of large medical bills in the near future. In such a scenario, if the debtor filed now, the debt would not be part of the bankruptcy. The debtor will therefore come out of bankruptcy and soon find himself in huge debt.
Finally, debtors are often nervous when they fall behind on their mortgages and feel as though the bank is about to take over any minute. It is important for debtors to familiarize themselves with the foreclosure process in their country. For example, in Georgia the lender must give the debtor one month’s notice of the sale of foreclosures and advertise the sale of the foreclosure in the legal organ of the debtor’s residence for four consecutive weeks. Therefore, the debtor has a lot of notice of the foreclosure sale date and can try to strike a deal with the lender before the foreclosure sale date, if the debtor chooses not to file unless it is the only way to save the house.
Most importantly, there are certain circumstances that require the debtor not to file at all. These circumstances include:
* The main debt of the debtor is a student loan that cannot be repaid
* The debtor is arguably “judgment proof” in the sense that he does not own the assets and therefore the creditor does not attempt to collect against the debtor
* The debtor has little unsecured debt and the debtor prefers to give up his guaranteed collateral and face potential shortfalls rather than file for bankruptcy
* The main debt of the debtor is taxes that cannot be repaid
* The debtor and creditor managed to make an agreement for the debtor to pay off his debts outside of bankruptcy
* The debtor does not have much debt other than the mortgage and the laws in the debtor’s country prevent the lender from pursuing a shortfall against the debtor after foreclosure and the debtor would rather give up his house than file for bankruptcy
It is important to note that all of the above scenarios are not the only scenarios where a debtor may choose to wait to file or not file at all. Those are just examples of scenarios where the debtor really needs to think about the timing and necessity of filing.
Peter Bricks is a bankruptcy attorney who practices with The Bricks Law Firm in Atlanta, Georgia. He has licenses in the State of Georgia and the District of Columbia. The Bricks Law Firm is a debt relief agency proudly assisting consumers in filing for bankruptcy. However, there is no attorney/client relationship with the readers of this article unless there is a fee agreement. Your situation is unique to you, and Peter Bricks and/or Bricks Law Firm will need to consult you individually before we can offer you valid and accurate legal advice. This article should only be used for educational purposes.
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