Three Situations In Which You Shouldn't Delay Your Bankruptcy Application

Conventional wisdom has it that bankruptcy should be the last resort for getting out of a financial quagmire. However, conventional wisdom isn't always right. There are a few situations in which it pays to file for bankruptcy right away. Here are some examples of such situations.

You Are Moving To a State with Lower Exemptions

If you are planning to move to a new state soon, compare its bankruptcy exemptions to your current state's exemptions to help you decide when to file for bankruptcy. Bankruptcy exemptions determine which properties you get to keep (the rest are sold to pay for your debts); exemptions are determined by state laws.

This comparison is necessary because you can't move to a new state and immediately file for bankruptcy. You have to wait for at least two years. Therefore, if the comparison reveals that your destination state's exemptions don't favor you, file for bankruptcy before you leave or file within 180 days after moving. This last option is possible because you are required to file for bankruptcy in your old state as long as you haven't lived more than 180 days in your new state.

You Have Just Started a Higher-Paying Job

If you have just started a new job, you need to file for bankruptcy before your new salary raises your average earnings too high and makes you fail the means test. The means test ensures that those who have the funds to pay for their debts don't file for bankruptcy. The test is calculated by averaging your income over the last six months and comparing it to your state's median income. Therefore, every month into your new high-paying job raises this average and increases your risk of failing the means test.

You Are Facing Overwhelming Creditor Actions

Lastly, you should also file for bankruptcy immediately if you are facing certain creditor actions, since filing for bankruptcy can stop them temporarily. For example, you may file for bankruptcy to get a temporary reprieve from a lender who is planning to repossess your property, a landlord who is trying to evict you, or a creditor who is suing you. Although this is just a temporary measure, it can help you get your financial house in order (for example, to catch up on your payments).

Therefore, don't wait to be overwhelmed by your financial circumstances before filing for bankruptcy. If you are facing deep financial problems, talk to a bankruptcy lawyer today to help you analyze if filing for bankruptcy as soon as possible is a good idea for you.


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