Should I File Bankruptcy Now or Wait? | Paducah, KY

Should I File Bankruptcy Now or Wait?

Kentucky Bankruptcy Attorneys

The timing of your Kentucky bankruptcy petition can hugely influence your future. Even if you have compelling reasons to file for bankruptcy, you might prefer to wait in certain situations, even if you’re qualified under the Chapter 7 type of bankruptcy in Kentucky.

If you have an urgent issue that can be temporarily alleviated by bankruptcy, like a car repossession, foreclosure, wage garnishment, or judgment liens, you should file bankruptcy immediately. However, there are certain situations wherein delaying your bankruptcy petition makes sense.

The best course of action if you’re exploring bankruptcy as a solution to your financial problems is to speak with a bankruptcy lawyer in Kentucky. You will get the legal guidance you need to take the appropriate action throughout the whole bankruptcy process. Contact Farmer and Wright, PLLC immediately to discuss your bankruptcy case with our experienced Kentucky bankruptcy attorneys.

I Have a Chance to Modify my Mortgage: Should I File Bankruptcy Now or Wait?

should I file bankruptcy now or waitMany people nowadays declare bankruptcy in order to postpone foreclosure. Although bankruptcy might be a sensible option, in this case, a lot of people file too soon, making it harder to secure mortgage modification. Many lenders may refuse to participate in or continue mortgage negotiations if you declare bankruptcy. 

Since your bankruptcy is going to eliminate your mortgage’s promissory note portion (but not your mortgage lien), there won’t be any more issues to negotiate, technically speaking. If you think you would want to modify your mortgage someday, you should probably avoid bankruptcy, or at the very least until the time you can gauge how the mortgage modification market is doing.

My Most Recent Income is High: Should I File Bankruptcy Now or Wait?

If you want to file for bankruptcy under Chapter 7 in Kentucky, the bankruptcy court will use what is called a “means test” to assess whether or not you qualify based on the income you have earned over the past 6 months. If your salary is very high, you can only file for bankruptcy under Chapter 13, which requires paying back a percentage of your debt.

If your salary suddenly dropped due to a recent wage reduction or a layoff, you may be able to qualify under Chapter 7 in Kentucky by just waiting for a couple of months. Your income average in the last 6 months might be small enough to pass the means test after accounting for several months of reduced income.

Assume your gross average income in Kentucky over the past 6 months was $8,000 every month, but you were recently retrenched and are currently receiving $1,500 every month from unemployment. Waiting 2 months before filing will result in your 6-month gross average income to decrease from 8,000 US dollars to below 5,900 US dollars per month, putting you in Chapter 7 bankruptcy eligibility in Kentucky.

I Own Property that I Want to Keep: Should I File Bankruptcy Now or Wait?

You may own property which you will lose if you’re filing bankruptcy under Chapter 7, but which you could retain if you waited a little longer – or at the very least have the time for selling and using the revenues. As an example:

  • Suppose you are receiving a $4,000 tax refund. If you receive it after filing, you must give it back to the trustee of the bankruptcy. But if you get your refund first, spend it on essentials within a couple of months, and afterward file bankruptcy, you will receive the refund’s entire amount.
  • Suppose you own assets worth greater than what you can retain in bankruptcy due to “property exemptions.” Waiting a couple of months before filing could result in the property’s value dropping low enough to qualify for property exemption. 

As an example, suppose you have a car valued at 6,000 US dollars but the state exemption regulations only allow people to own a car worth up to 5,500 US dollars. Waiting a couple of months could result in the car’s value to fall low enough to qualify for the exemption.

  • Suppose you have non-exempt assets, which means the trustee in bankruptcy can get your property to sell them to pay your creditors. (Things besides your home, vehicles, household items, clothes, and other essentials are usually nonexempt.) Selling your home for its fair market value prior to filing bankruptcy then spending the money on essentials will benefit you more than it benefits your creditors. 

I Anticipate New Debts: Should I File Bankruptcy Now or Wait?

If you anticipate other considerable expenses in the near future, you should delay your bankruptcy filing in Kentucky. In general, Chapter 7 bankruptcy only discharges debts owed as of the date of filing. Debts that arise later on will be your responsibility to manage, sometimes for several years. 

For instance, if you are scheduled to have knee surgery within the following year and must pay all or a portion of the costs, these costs will be erased if you file for bankruptcy under Chapter 7 after the surgery.

I Recently Took On New Debt or Transferred Property: Should I File Bankruptcy Now or Wait?

Some transfers and payments you make prior to filing for bankruptcy can’t be taken back, and they may even put your bankruptcy at risk. Below are the common issues that you need to look out for:

  • If you spend more than $550 on a single credit card for luxury services or goods in less than 90 days of filing bankruptcy in Kentucky, the bankruptcy court could well presume that you made the charges fraudulently, meaning you never planned to repay the credit card debt. If this occurs, your charges will survive your bankruptcy rather than be wiped out along with your other credit card debt.
  • Similarly, if you charge $825 or more in cash advances on any single credit card in less than 70 days of filing bankruptcy in Kentucky, your cash advances may be presumed fraudulent and they may survive your bankruptcy.
  • If you make a payment to a commercial creditor of more than $600 in less than 90 days of filing bankruptcy in Kentucky, or a payment of more than $600 to a business associate or a relative within a year of filing bankruptcy, the bankruptcy trustee can take that money back (“recapture” it) and distribute this to your creditors.
  • If you’ve given or sold any type of property to someone else in the last two years, the bankruptcy trustee can reclaim it and give it to your creditors, unless  it falls under a property exemption.  The trustee may even contest your right to a bankruptcy discharge if the trustee can show proof that you transferred the property in order to conceal it from the bankruptcy court.

By waiting until these various time periods have passed, you eliminate the possibility of these debts surviving – or even sabotaging – your bankruptcy filing.

I Can’t Pay my Debt Installments: Should I File Bankruptcy Now or Wait?

When people in Kentucky fall behind with their credit card payments, a surprising number of them consider filing for bankruptcy. Some of them who are not familiar with the Kentucky legal system believe that if they stop paying, they will go to jail. This is not true. Moreover, the majority of creditors, which include banks, credit card companies, and medical-care providers, cannot garnish your bank account, wages, or home except if they first file a lawsuit and win in court.

It costs money and time to sue you, and not every creditor is willing to go to this length. If a lender sues you, you will be served personally with a subpoena and complaint, and you will usually be given 30 days to provide a simple response that denies the accusations made and compels the creditor to show proof of its case at trial months or even years later.

Due to the potential expense of suing, many creditors will instead declare the debt “uncollectible” and deduct it from their taxes. This is likely to occur in your case if you do not own any real estate and have only a few assets that can be seized, or if you are jobless or getting Social Security. 

To put it another way, even though bankruptcy can eliminate the majority of debts, you might be able to simply stop making payments without suffering any repercussions (other than a possible drop in your credit score) and avoid paying the bankruptcy fees. If a creditor does later sue you and wins, and you have money or assets to lose, you could always file for bankruptcy to have the debt discharged.

I Want to Put an End to Collections: Should I File Bankruptcy Now or Wait?

The most prevalent reason people consider filing for bankruptcy in Kentucky is to stop the onslaught of phone calls that they receive when they stop paying their credit card bills and other debt installments. While bankruptcy is a quick solution for this problem, so is a federal law known as the Fair Debt Collection Practices Act (FDCPA). 

The FDCPA (Title 15 U.S.C. Section 1692c) and many state laws require debt collectors or collection agencies to refrain from calling you at home or work if you request it. Alternatively, as one judge told a bankruptcy filer, “If you do not want the creditors to call you, change your phone number.”

Do You Need Help in Making a Decision?

It is not always easy to figure out whether you should file bankruptcy now or wait it out. Speaking with a seasoned bankruptcy attorney can help you understand your options.

Bankruptcy is a complicated process, and you most likely have many questions about your personal bankruptcy case. Farmer & Wright, PLLC can provide answers and help you in understanding your options under Chapter 7 or Chapter 13. For more information, contact a personal bankruptcy lawyer at our Paducah Kentucky law firm today!

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