Most people find it difficult to make the decision to file for bankruptcy. It is common for residents of California to struggle with debt for years before deciding it is time to take action and put debt stress behind them. Though it is never too late to file for bankruptcy, waiting too long can be costly. Waiting too long to file may result in the following:
● Paying interest and late fees on debt that will eventually be discharged was a waste of money.
● Wage garnishment, bank levies, and liens can devastate your household budget.
● The loss of your home, car, or other property used as collateral for secured debt.
● A persistent drain on your health, sleep, relationships, and even job performance
If your debt is unmanageable and having a significant negative impact on your life, it is usually better to act sooner rather than later. However, before you race to file bankruptcy, there are some past actions that may affect your ability to file, what type of bankruptcy you need to file, or cause problems with your case.1
Most people aren’t aware that what they’ve done before filing may be problematic, so an experienced Los Angeles bankruptcy attorney is the best source of information about the factors that influence your bankruptcy petition. Winterbotham Parham Teeple, a PC provides free consultations so you can discuss issues like this before making financial decisions.
Here are a few of the actions that can affect your filing:
Recent property gifts, transfers, or sales.
Many people don’t realize that any transfer of assets must be disclosed on your bankruptcy petition. Whether you transferred a home out of your name or gifted a car to a family friend, these actions must be disclosed if they fall within the ‘look back’ period prior to filing. These transactions are scrutinized when you file for bankruptcy. If you gave anything of value away before declaring bankruptcy, or if you sold a property for less than its market value, the bankruptcy trustee may be able to reverse those transactions and reclaim the property for the bankruptcy estate. When a transfer is reversed, the asset can be liquidated by the bankruptcy estate to pay your creditors. Even if you sold an asset for it’s fair market value, the court will review what funds you received, how it was spent and if it’s protected.
The Chapter 7 Trustee can look back years when determining if a large asset was transferred out of your name, so it’s best to discuss your financial history with a qualified bankruptcy attorney before deciding to file for bankruptcy.
Credit transactions that have recently occurred.
Though most people do not consider it in these terms, purchasing something on credit or obtaining a cash advance with the knowledge that you intend to discharge the debt in bankruptcy is fraud. While any credit card used in the 90 days preceding bankruptcy can be considered a red flag, certain types of transactions are presumed non-dischargeable. These include luxury goods and services of a certain value purchased within 90 days of the bankruptcy filing, as well as any cash advances taken within 70 days of the filing.
However, the analysis is only sometimes straightforward. Sometimes the presumption of non-dischargeability can be overcome. Furthermore, purchases made after the 90-day period may still constitute fraud if the trustee or a creditor can show that the bankruptcy petitioner did not intend to pay those debts. If you are still determining the impact of recent credit card purchases, it is best to consult a Los Angeles bankruptcy attorney even before the 90-day period expires.
You are about to receive assets.
Money and other property you haven’t yet received may not strike you as assets, but the bankruptcy court does. In fact, some people who are expecting a payout believe it is a good idea to file bankruptcy as soon as possible to avoid losing those funds to a creditor without realizing that those anticipated assets must be disclosed.
If you have a pending lawsuit (or even a claim that could lead to a lawsuit), a debt that someone owes you, or other property that you already have a right to, it becomes part of your bankruptcy estate. Unless an exemption applies, the trustee may be able to claim the asset for the benefit of your creditors. As a result, it is best to discuss these potential windfalls with a bankruptcy lawyer to see if these anticipated assets are protected, or if they could be liquidated by the bankruptcy court.
The United States Bankruptcy Code prohibits consecutive bankruptcy filings. If you previously filed Chapter 7 bankruptcy and received a discharge, you must wait eight years before filing again and receiving a discharge. Other combinations, such as filing Chapter 13 after a Chapter 7 case, have shorter waiting periods.
Other restrictions may also apply. For example, if you’ve recently had another bankruptcy case dismissed within the last two years, the automatic stay—a powerful tool for stopping collection activity as soon as you file bankruptcy—may be limited.
If you’ve previously filed for bankruptcy and are considering doing so again, ensure you understand the timelines and will receive the full benefit of your bankruptcy filing.
California Bankruptcy Experts
In all of the above cases, it is strongly advised that you seek the advice of a bankruptcy expert to determine if they apply to you. Even if they do, there may be ways to approach these issues so that you can obtain the debt relief you seek. Bankruptcy, when used strategically, can be a powerful tool for regaining control of your finances and building a more stable financial future.
However, there are several factors to consider when deciding whether bankruptcy is right for you, which type of bankruptcy is best for your situation, and when the time is right to file bankruptcy. A free consultation with one of our experienced bankruptcy attorneys can assist you in determining the best option for you. Call 800.400.9000 today.