If you ask any bankruptcy lawyer what they feel the best time is for filing
bankruptcy, you'll likely hear a resounding, "Now!" In truth,
waiting around to file bankruptcy increases your risk for wage garnishments,
auto repossession, and even
foreclosure of your home. The New Year is here now, and there are many reasons why you should consider
January as a good starting point for filing bankruptcy.
Why You Should File Bankruptcy at the Beginning of the New Year
For the current year, you aren't legally required to pay off
income tax debt until the first day of the next year. Many people turn to
Chapter 13 bankruptcy in order to pay off large tax debts. If you're planning on doing so,
you should wait until the first day of January so that the tax debt from
the previous year is counted as a pre-petition debt.
Purge Debt from the Holidays
It's currently estimated that Americans
spend nearly $10 more on average each day in the month of December than they do in any other month of the year.
When added up, this creates a $300 increase in spending that is likely
done with a credit card. This is why it makes sense to file for bankruptcy
at the beginning of the New Year.
Credit Card Debt Specifications
As you would assume, there are some stipulations that come along with purging
credit card debt. Credit card companies are savvy when it comes to borrower
deception, and many will notice unusually frequent use of credit just
before a borrower files bankruptcy. Some purchases made just prior to
may be legitimate. The Courts look at your intent, which means when you incurred the debt
did you have the intention and means to pay it back.
We always advise our clients that when they decide to file for bankruptcy
stop using their credit cards and also stop paying on them. This way the funds that were being paid to the credit cards can be used
to cover the attorney and Court fees to get the bankruptcy case filed.
It is further detailed in the Bankruptcy Code that goods and services are
not labeled under "luxury" if they are absolutely necessary
to the borrower or a dependent of theirs. For example, gas for work travel
that is charged to a credit card doesn't qualify as being a luxury
expense. However, $1,000 spent on a new computer would qualify as an unnecessary
If you carried a credit card balance of over $650 for goods such as groceries,
gas, and home necessities, you would be in the clear. Not carrying a debt
over $650 will prevent you from having to even explain any charges in
the first place.
Something to Think About Before Your File Bankruptcy
Once you make the decision to work with an attorney on a bankruptcy case,
cease use of your credit cards at once. Using credit while you are openly
filing for bankruptcy is a direct indication that you likely have no intentions
of paying it back. This is known as fraud, and you could easily be charged
in a court of law for doing this.