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How to Time Your Chapter 7 Bankruptcy Filing

Chapter 7 Bankruptcy
Seeking relief from your debts through Chapter 7 bankruptcy is a good route to take when you have too many debts to pay and not enough income, but you should make sure you do not file too quickly or wait too long to file. In other words, you need to time your case, and here are several timing issues you should consider as you plan to move forward with this.

Potential Foreclosure or Repossession

One issue that affects when you should file is a potential foreclosure or repossession. If you currently expect your mortgage lender to pursue foreclosure of your house or your car lender repossession of your car, you might want to file quickly. Filing for bankruptcy now will stop both of these things from occurring, and it will give you more time to determine what to do.

If you file for Chapter 7, your lenders must legally stop pursuing collections on these accounts. If they were going to pursue foreclosure or repossession, they must wait. They must give you time to settle your bankruptcy case before they take any action against you.

Loan Modification 

On the other hand, if you are currently trying to modify your home loan and want to file for bankruptcy, you should work on the loan modification first. As soon as the lender approves it, you could go through with bankruptcy, but you would not want to file for bankruptcy first.

If you file for bankruptcy before the modification goes through, your lender may deny offering it to you, and you could risk losing your home.

More Debts in the Near Future

Another situation where you should wait to file is when you expect to have more debts in the future. For example, if you were terribly sick and ended up in the hospital, you will receive medical bills. If you file for bankruptcy before you receive these bills, you may lose the chance of including them in your bankruptcy estate.

If this happens, you would still have to pay these bills out of your pocket, even if you filed for bankruptcy. Therefore, make sure you are not expecting any more debts in the near future when you file.

Spike in Income or Windfall of Cash

When you visit a lawyer to file for bankruptcy, the lawyer will thoroughly examine your income for the past six months. If it is too high, you will not qualify for Chapter 7. Therefore, if you received a windfall of cash or had a spike in your income in the last six months, your lawyer might recommend waiting to file until six full months passes from the date of the windfall.

Disposal of Assets

Bankruptcy courts often will look back two years into a person's history when the person files for bankruptcy, and there are certain things the court looks for. One of these is disposal of assets.

Some people will try to avoid losing their assets in bankruptcy by giving them away before filing. Be aware that this is something the courts label as fraud. You cannot give things away before you file simply to prevent losing the items. If the court catches you doing this, they will throw out your case.

If you gave anything away, you should wait to file for bankruptcy for at least two years to avoid getting your case thrown out of court due to fraud.

If you would like to find out when you should file for bankruptcy, contact McMaster Law Firm, LLC. You can meet with an experienced lawyer who will review your case and give you advice about filing for Chapter 7 bankruptcy.

Disclaimer: The McMaster Law Firm, LLC provides this website for informational purposes only and does not intend it to be legal advice, nor does the law firm attest to the accuracy of information provided by links to other websites and forms.