The answer depends on what kind of debts you have, whether or not you’re currently paying them, what kind of exempt and nonexempt property you have, and what actions your creditors have taken or threatened. In general, you should consider about the following things when thinking about when to file bankruptcy:
You shouldn’t file the case until all anticipated debts have been incurred, because only debts that have been incurred when the case is filed are dischargeable and it could be another eight years before you can file for bankruptcy again. For example, if you incurred substantial medical expenses, you should not file a chapter 7 case until the illness or injury has been either cured or covered by insurance, as it will do little good to discharge, say, $100,000 of medical debts now and then incur another $100,000 in medical debts after the case has been filed.
You shouldn’t file the case until the person filing has received all nonexempt assets to which he or she may be entitled. If you’re expecting an income tax refund or a similar nonexempt asset in the near future, your case should not be filed until after the refund or asset has been received and disposed of. Otherwise, the refund or asset will have to be turned over to the trustee.
You should wait to file the case if you to acquire property through inheritance, life insurance or divorce in the next 180 days, because the property may have to be turned over to the trustee.
If you are contemplating divorce, you may want to wait until you have filed bankruptcy and your debts have been discharged. Instead of having to divide bills between you and your spouse, you can eliminate those issues before even filing your divorce.
If a creditor is threatening garnish your paycheck or bank account or if a foreclosure action has been you filed the case should be filed immediately to take advantage of the automatic stay that goes into effect when you file bankruptcy.
To learn more about whether or not Chapter 7 bankruptcy or Chapter 13 bankruptcy is your best option, schedule your free, confidential bankruptcy consultation with a Colorado bankruptcy attorney today. Our online scheduling system allows you to schedule bankruptcy consultation at a time that is convenient for you.
Colorado Bankruptcy Law Group, LLC is a personal bankruptcy firm serving clients in the greater Denver area.