I often have people ask me when they should file bankruptcy. Usually the answer is that it depends on your circumstances, and why you need to file bankruptcy. If you have fallen behind on your home, and you want to keep it, timing is critical in filing your bankruptcy. You need to file a Chapter 13 before your home is sold at the foreclosure sale. Foreclosure sales in Texas occur on the first Tuesday of the month. To be safe, you would want to file your bankruptcy at the very latest by that Monday. If you need to file a Chapter 13 to protect your home, please call a qualified attorney.
Most of the time there is no pressing need to file a Chapter 7 quickly. Filing a Chapter 7 bankruptcy is not going to protect your home from being foreclosed for very long (though it can delay it), and it is not going to protect your vehicles from being repossessed in the long term. While there might not be a time crunch to worry about in filing a Chapter 7, many people lose a lot of money trying to avoid filing a Chapter 7 bankruptcy. Oftentimes people will deplete 401K or IRA accounts in an effort to pay credit cards or medical bills. Bankruptcy is intended to give you a fresh start, and part of that fresh start is allowing you to preserve your retirement accounts and other assets so that you can live a meaningful life when you retire. If you are at the point where you are considering borrowing money from your retirement accounts to pay your bills that are piling up, call an experienced Arlington TX bankruptcy lawyer.
Another aspect to the timing of filing a Chapter 7 bankruptcy is called the “windfall rule”. The windfall rule states that if within six months from the date of filing, you come into a large sum of money like an inheritance, or a settlement of a lawsuit, you are not supposed to spend that money. You are to let your attorney know, and the attorney will speak with the trustee to determine what to do. If the funds cannot be exempted under state or federal law, the trustee is going to take some or all of those funds to pay your creditors. A very simple example of this is receiving your tax refund at the beginning of the year. Typically, I advise my clients to wait until they receive their tax refund before filing bankruptcy, because if they become entitled to the tax refund after they file bankruptcy, the trustee can take the refund if it cannot be exempted.
If you are considering filing a Chapter 7 or a Chapter 13 bankruptcy, an attorney can explain the process to you in a way that you will understand, and will make sure that the process is as stress free and painless as possible.
Thanks to our friends and contributors from Brandy Austin Law Firm, PLLC for their insight into bankruptcy