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.