Question: What other factors should I consider when deciding when I should file for Bankruptcy?

Factors regarding the need to obtain an automatic stay will likely be dictated by your creditors, not you. The automatic stay is a useful tool in temporarily stopping foreclosure proceedings brought by your mortgage holder(s), as well as collection efforts, collection calls and lawsuits filed by your creditors, if any. This foreclosure and debt collection process generally takes a few months, not a few days, and the benefit of the automatic stay can create some additional time for the debtor to deal with logistical issues associated with preparing the bankruptcy petition, appraising assets, selling real property or finding new housing, if necessary.

In order to file for bankruptcy under any section of the Bankruptcy code (Chapter 7, 11, or 13), your federal income taxes must be filed up to the current year (2008). Other documents are necessary for preparing the bankruptcy petition and schedules, such as a credit report, current credit card statements, bank statements, and income information. If this information is not immediately available, it will take some time to collect and review. If you believe a bankruptcy filing is on the horizon, your best bet is to contact an attorney for a bankruptcy planning consultation, then begin preparing the information needed to file.

Equally important in deciding when to file is a debtor’s own ability to handle the current situation, balanced against their need to make immediate changes. Some debtors will need time to prepare for relocation to an apartment or smaller home, whereas others will be anxious to take action to save their house or get a fresh start. These factors are unique to each case, and should be discussed with an attorney before filing your bankruptcy petition.

I have been out of work for some time, my bills have gotten out of hand, and I need to file for Bankruptcy. I may be getting a new job soon. Will my new job affect my Bankruptcy filing?

If a would-be Chapter 7 debtor were to see a significant change in their income before filing a Chapter 7 bankruptcy, there is a risk that the debtor would no longer qualify under the Chapter 7 Means Test, and must file under Chapter 13. While Chapter 13 Bankruptcies are often effective in allowing a debtor to cure mortgage arrearages and keep their house, if the debtor’s intention is to pursue liquidation of all assets (including the house) or does not have real property to protect, your increased income would be required by the U.S. Trustee to fund the Chapter 13 plan, and not be used for other costs/expenses. In this case, a Chapter 7 Petition should be filed before any increase in income.

Obligations that are considered by the Bankruptcy Court to be “domestic relations orders” are non-dischargeable and priority debts. They are defined in U.S. Bankruptcy Code Title 11 Section 101 14(A).

In summary, the term 'domestic support obligation' includes child support, alimony, or other support payment, and can include payments for housing, health insurance or other costs paid on behalf of a spouse or ex-spouse. If payments are owed and in arrears then the 'domestic support obligation may also include interest and the interest is non-dischargeable as well.

It is very important when preparing a Chapter 7 Bankruptcy to be aware that these debts will not be discharged, i.e. will still be owed after the bankruptcy.

It is likewise very important when preparing a Chapter 13 Bankruptcy to be include the 'domestic support obligation' in the Chapter 13 plan as a priority debt and to be clear about how arrears will be paid versus how the ongoing payment reduces the filer's available income. If these issues are not addressed specifically, the Bankruptcy Court may find that the Plan is not binding against your ex-spouse as was the case in In re Owen, 2009 WL 693161 (Bky.E.D.Tenn. March 13, 2009). For an excellent explanation of what happened in that case check out the following article on the Bankrutpcy Law Network: "Stealth" Plan Provisions: Confirmation of Chapter 13 Plan Did not Alter Domestic Support Obligation".