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Should you wait to file for bankruptcy?

Are you considering bankruptcy but feeling the timing is not right? Many times, when people are going through a financial crisis they continue to believe circumstances will change or there may be a better time to handle their situation. Regardless if you are dealing with medical debt, credit cards or having financial trouble after a divorce, in most cases there is no reason to put off a bankruptcy.

But there are situations that waiting on bankruptcy should be considered. If you have determined your best course of action for your financial situation is bankruptcy, you may want to hold off a little while if you encounter any of the following.

Your salary has decreased – If you are planning on filing Chapter 7 bankruptcy right away, this can actually hinder the filing. Chapter 7 is for debtors who are unable to handle a three-to-five-year repayment plan and is based on financial need. Your situation may show that you are eligible, but your history may not. Determining if you qualify for bankruptcy is done by the Means Test, which takes your average income from the last six months and compares it to the median income for households like yours in your area. Since the test will use your last six months on income, if you just had a salary decrease due to a demotion or lay off, then this will not be represented of your income from the prior six months. By waiting a little while, the Means Test will use more realistic information.

You want to modify a mortgage – Bankruptcy has the advantage of wiping out your debts and giving you a clean slate to work from. However, bankruptcies don’t sit well with lenders and can make them wary. This will be a problem if you are planning to get a loan or modify an existing mortgage. Once your file for bankruptcy, the mortgage promissory note is cancelled leaving you with no ability to negotiate new terms.

More debts on the horizon – If you know that more debts will be incurred soon, you may want to delay filing. However, you are not able to rack up frivolous debt with the belief it will just end up being wiped out in the bankruptcy. But once you file for bankruptcy, for Chapter 7 you will need to wait eight years before you can file Chapter 7 again and four years if you want to file Chapter 13. If you file a Chapter 13 you will need to wait two years before filing another Chapter 13 and it will be six years before you can file a Chapter 7 discharge.

If you are in a situation that you believe bankruptcy is an option for you, you should speak immediately with a bankruptcy expert to go over your situation. There is no need to wait to start talking about the possibility of bankruptcy, but there may be situations you may want to hold off filing for a little while.

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The Law Offices of Sutton & Sutton
1746 Cole Boulevard Suite 225
Lakewood, CO 80401

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