When Should I File my Chapter 7 Bankruptcy?
Usually, it’s chapter 13 cases that are most time-sensitive, but that doesn’t mean you should carelessly delay the filing of your chapter 7. Here are a few reasons why filing sooner, rather, than later can be a good idea.
- Repossession or foreclosure
While it is true that a chapter 7 filing doesn’t provide a mechanism for curing secured-debt arrears (that’s what chapter 13 cases do), it can delay a repossession or foreclosure by several months. You might not want to stay in your house forever, but you might still need a few extra months to make new living arrangements. In that situation, it is important to file the case prior to expiration of the 10-day upset bid period in a foreclosure, or prior to the car being picked up in a repossession situation.
- Entry of Judgment
In many situations, the entry of a state court judgment will not make any practical difference in your bankruptcy case. Judgment or not, that Capital One debt is getting discharged. But if you own real estate (and especially if you don’t share ownership of that property with a spouse) then that judgment can result in a judgment lien attaching to that property. To be safe (and to clear up any future title issues), it can be a good idea to file the bankruptcy prior to the entry of that judgment.
- Expected Inheritance or life insurance proceeds
If you become entitled to receive an inheritance or life insurance proceeds within 180 days of filing a chapter 7 case, then that money will go to pay your debts. While predicting an elderly or ill family member’s life expectancy is both emotionally and practically difficult, it is worth considering. If you’re rich great-aunt is a healthy ninety years old, go ahead and file your case now, not when she’s in hospice care.
- Changes in Income
The income-eligibility component of chapter 7 cases involves the analysis of your last six months of income, meaning that fluctuations in your income over those six months are blended together. If you just got a big raise, file now, not in four, five, or six months when the six-month income average may be too great to qualify for chapter 7.