When you file bankruptcy can often be as important as “if” you file bankruptcy. Given that you cannot automatically dismiss a Chapter 7 bankruptcy filing, it is crucial that you time your bankruptcy filing correctly.
Surprisingly, there are a lot of factors to take into account when picking a filing date. There are in fact so many that I’ve divided this blog into two parts and will discuss the nine things I look at as a Dunwoody bankruptcy attorney when evaluating if the filing of my client’s case is ripe.
*** Are you facing a garnishment or foreclosure?
Foreclosures in Georgia are on the first Tuesday of every month, but the procedure varies by state. To stop a foreclosure via the automatic stay, a debtor needs to file bankruptcy prior to the foreclosure sale date. However, a debtor who wishes to surrender his home in the bankruptcy but live in it as long as possible might consider waiting until near the eve of the foreclosure sale to file the bankruptcy rather than when or prior to receiving the sale notice.
In Georgia, a debtor’s wages can be garnished, but other states do not permit that. If a debtor’s wages are being garnished, he is understandably probably in a hurry to file bankruptcy. However, bear in mind that funds garnished in the last 90 days can be recovered by the debtor as preferences if they exceed $600 and the debtor can exempt them. Therefore, although it sounds convoluted, the debtor might actually hold off filing to get garnished an additional time to put himself in a position to recover all the garnished funds.
*** Have you been making preferential debt repayments or gifts?
Imagine a scenario of the honest debtor who has dutifully been repaying mom for that loan she gave him to repay creditor, but still needs to file bankruptcy regardless. Where the debtor has been making those payments to mom, the trustee might argue those payments are “insider preferences” that can be recovered from mom. If so, it might behoove the debtor to wait out the required time period before filing to avoid this possibility.
Another scenario is the debtor has gifted money to a friend or relative. Perhaps the debtor even did it when times were good. This does not preclude the possibility of the trustee or a creditor trying to recoup this money through an adversary proceeding, so again the debtor might want to wait out certain time deadlines.
*** Do you have dischargeable tax debt?
Debtors are often unaware that they can discharge income tax debt in bankruptcy under certain circumstances. I recommend getting your tax account transcript and inputting the results into taxdischargedeterminator.com to find out. I have had multiple clients who wanted to file ASAP, but held off filing when they learned that waiting a little bit longer enabled them to get rid of a huge debt to Uncle Sam.
*** Can you afford the fees to file bankruptcy?
Just like everything else in life, money is a factor in filing bankruptcy. In addition to your court filing fees, you might also have attorney fees. I’ve certainly encountered instances where the debtor wanted to file immediately, but could not afford all the fees. Sometimes in this instance they get a gift from a friend or family member. Other times they wait to raise the funds. This often involves not paying towards some debt. Choosing the right one is strategic and involves consultation with your attorney.
In Part II, I will go into detail of the remaining factors, which are: (1) Has my client previously filed, which impact his eligibility (2) Are there any assets my client could lose by filing right now (3) Does my client need to wait to establish venue or exemptions (4) Is my client judgment proof and (5) Should my client wait to get a better result on the means test.
Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys (NACBA). He is a regular contributor to bankruptcyblog.org has bankruptcy attorney offices in Jonesboro, Woodstock, Cumming, Atlanta and Dunwoody.