Man filing for bankruptcy

When is the Right Time to File for Bankruptcy?

By Derek Prosser

If you are considering filing for bankruptcy, whether chapter 7 or chapter 13, it is important to file at the right time. If you file too early, you expose yourself to additional financial risk. For example, by filing too early, you run the risk of losing property that you otherwise would have been able to keep, or you may have to file for chapter 13 bankruptcy instead of chapter 7. In addition, by waiting to file, you may be able to address your debt in other ways, thereby avoiding bankruptcy altogether. In this article, we examine when it may benefit you to delay filing for bankruptcy. 

If You Can Modify Your Mortgage

Many people file for bankruptcy in order to delay foreclosure. And although bankruptcy can be an appropriate solution in this situation, people often file much earlier than is necessary, thereby making it more difficult to obtain a mortgage modification. After a person files for bankruptcy, many lenders will refuse to enter into negotiations over that party’s mortgage. 

If You’ve Recently Earned a High Income

Upon filing for chapter 7 bankruptcy, the court will examine your income over the past six months to determine your eligibility. The court does so by using what is known as the means test. If you’ve recently earned a high income, you will only be permitted to file for chapter 13 bankruptcy, which means that you will have to repay a portion of your debts. However, if your income has dipped recently, you may be able to qualify for chapter 7 by waiting a few months to file. 

If You Want to Keep Certain Property

Chapter 7 bankruptcy often entails losing certain property. However, by delaying filing, you may be able to keep such property or sell it to use the proceeds. Examples of property you may be able to keep by delaying filing for bankruptcy include: 

  • Property exceeding the exemption maximum
  • Nonexempt assets
  • Tax refunds

If You Anticipate Additional Debt

If you foresee significant expenses in the near future, you may want to hold off on filing for bankruptcy. Generally, chapter 7 bankruptcy only erases your debts as of your date of filing. Debts that come along after you file for bankruptcy will be your responsibility to pay. For example, if you anticipate having a surgery in the next year and will be responsible for some or all of the associated expenses, such costs will be erased if you wait to file for chapter 7 bankruptcy until after the surgery is complete.

Contact a Dallas Bankruptcy Lawyer 

If you are considering filing for bankruptcy, the attorneys of Toronjo & Prosser Law can help you determine whether the time is right to do so. We routinely represent clients in bankruptcy proceedings, and have a hard-earned reputation throughout the state of Texas for providing informed representation and dependable service. Please contact us to arrange a free consultation with a Dallas bankruptcy lawyer.

About the Author
Derek Prosser understands that clients need help and need answers and that in order to properly address those concerns, clients need to deal with an attorney first and always, not just an assistant or paralegal.  By effectively counseling from the outset of a case, Toronjo & Prosser Law can anticipate and address potential problems before they arise, as opposed to when they’ve already surfaced (the “Counsel Later” approach), and, in the end, strive for a seamless representation.