When is the Best Time to File for Bankruptcy - a Utah Guide
Many people ask, or should ask, when is the best time to file for bankruptcy? Of course, you get to receive an attorney's response: it depends.
If your paychecks are being garnished, or you are being harassed by creditors, you may want to file for bankruptcy immediately. Many people filing for bankruptcy (or indeed, anybody in general) cannot afford to lose 25% of their income to garnishments from creditors. Further, the emotional turmoil people experience, when they are being harassed and tracked by a creditor, will often make any wait unbearable.
For those of you who have the ability to time the filing of your bankruptcy, there are a few things you should consider before filing.
1. Tax Refund. What do you expect to receive for a tax refund? When do you expect to receive it? At Atticus Legal Group, we see this as an issue in bankruptcy more than any other issue. If a consumer files for bankruptcy on January 1, he/she probably just lost his federal and state income tax return (if he/she would have received a refund). The bankruptcy trustee will use the tax refund to pay creditors. If you have filed for taxes, and expect a tax refund, do not file for bankruptcy until after you have received and spent the refund.
You may also lose a significant refund if you file in December, November, October, etc. While the trustee will most likely take a pro rata share of the federal and state tax refund (depending on the month you file), there may be alternatives to avoid losing your tax refund.
If you have the ability to wait, try to wait until you have the previous year's tax return (this could be as early as the end of January), while making sure to file before it gets too late into the next year. Use your tax refund to pay your bankruptcy attorney if you do not have other sources.
If there are any potential issues with your tax refund, talk to an attorney before filing for bankruptcy. We are experienced in these matters, and we may find ways to mitigate the potential damage to your federal and state income tax return.
2. Cash Available. Do you expect to receive any cash, from any source, in the near future? Just as discussed with the tax refund, if you have cash available, the trustee will pursue the cash to pay creditors. Instead of holding on to it, use this cash to buy essential items, purchase clothing and other necessities for yourself and your household, take care of any medical procedures, and even pay your bankruptcy attorney with this cash (so long as the payment is reasonable and for essentials, you should be fine).
3. Non-Essential Purchases and Cash Advances. Have you used your credit card to obtain cash or purchase non-essential items? When did this occur? If you are using your credit card to obtain cash, or purchase non-essentials (buying your family members expensive, rather than understandable, Christmas presents just before bankruptcy is a big no-no), you may want to wait 70-90 days before filing for bankruptcy.
4. Questionable timing. While broad, this factor is designed to get you to think. There are many factors you must consider before pursuing a bankruptcy. If you are questioning an activity you recently engaged in (whether selling property, offering gifts, donating money, or paying off one particular creditor), or are otherwise attempting to gain the system, you may be placing your bankruptcy discharge at risk. Before acting, consult with an attorney. You may have rights, don't lose them because of timing.
In conclusion, it is important that you speak with a Salt Lake City, Utah attorney regarding your bankruptcy action. While the above-factors are important to consider before filing for bankruptcy, this article does not (and cannot) provide all of the facts or all of the exceptions (for example, you can file for bankruptcy if you have recently received a cash advance, but it depends on what you have withdrawn). Only an attorney can provide the guidance you need.
For further questions, call Atticus Legal Group at (801) 784-0529.