At Utah Bankruptcy, we’re bankruptcy attorneys dedicated to helping you make the best of what can be a tough situation. One item we commonly assist our clients with that they may not have previously known about: Delaying a petition filing.
This generally sounds like a weird idea – the need to petition for bankruptcy generally assumes some degree of insolvency and a need for quicker solutions. However, waiting in certain situations might increase your ability to get more money, protect a relative or qualify for Chapter 7. Let’s look at a few situations where it might be best to wait on filing.
Payments Too Close
If you’ve made certain payments to creditors within too close a time before filing for bankruptcy, some strange situations can occur. If this payment is to a bank, for instance, and is within 90 days of declaring, the bankruptcy trustee will have the right to demand that money back from the creditor when you file. That money goes into you bankruptcy estate, which you can’t touch – this can create serious issues for creditors, especially if a creditor is a friend or family member.
Recent Credit Purchases
Depending on the purchases in question, some credit card usages might create similar issues. If you spend over a certain amount on luxury goods or services within 90 days of filing, for instance, your credit card company will be allowed to demand that the court not discharge that debt – and you’ll have to pay it back. The same is true for cash advances, generally over $950 and within 70 days of filing.
Recent Transfers
If you’ve recently transferred money or given away property with nothing in return – specifically within the last two years before filing – this will not be viewed well. Even if you didn’t intend this, this will be seen as a fraudulent transfer meant to exclude certain funds from a bankruptcy filing. If you’ve made any major transfers, even for unrelated reasons, you’ll need to wait at least two years before declaring bankruptcy.
Income Set to Decrease
Part of bankruptcy filing includes a means test that determines the types and amounts you need to pay into bankruptcy plans. For this reason, if you’ve recently lost a major income source or your job, waiting can be best – the means test accounts for your previous six months of income, so if you can wait six months, this will help your average income go down and could help get you into a Chapter 7 situation.
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