Should I File My Bankruptcy Case ASAP or Wait?
If you’re struggling financially as a result of the COVID-19 pandemic and considering bankruptcy, you may be wondering whether you should file soon or wait to file. The answer is that whether to file sooner or later depends on your circumstances, but regardless, if you are worried about your debts and ability to pay them, it’s a great idea to schedule a free consultation with a bankruptcy attorney to get advice on whether and when to file.
Some of the reasons I advise clients to move forward with filing quickly include:
- A pending foreclosure sale – The CARES Act has given many homeowners forbearance options suspended foreclosure actions through mid-May and Colorado Governor Jared Polis has provided the state with some foreclosure relief through May. But these measures are only temporary and do not actually wipe out the requirement to pay your mortgage. If a foreclosure action has been filed against your home, in most cases all missed payments must be paid before the sale date, or a chapter 13 bankruptcy must be filed before the sale date to stop the sale and save the property.
- Lawsuits filed against you – While the Colorado Attorney General has asked debt collectors to “act responsibly and compassionately” towards borrowers, there is currently no law prohibiting lawsuits or other debt collection activities. If a judgment from a lawsuit is entered against you, it could result in the loss of 25% of your wages, or money in your bank account, a lien against your home, or other negative consequences. A bankruptcy filing immediately stops lawsuits and wage garnishments
- Recent job loss may allow higher-income earners to file chapter 7 – While the bankruptcy “means test” sometimes requires folks earning a higher income to file a chapter 13 case (where you pay what you can afford for 5 years), a recent job loss may make such a person eligible to file chapter 7 (where you do not repay any debt), which can be a huge relief.
On the other hand, it may be smarter to delay a bankruptcy until you know just how bad your financial situation is going to get, and right now so many are wondering how long they’ll be furloughed at work or have their hours cut. If you file a bankruptcy case, any money you borrow after you file will still be owed, and if your income is still very low weeks or months after you file, you may need to borrow money for the bare necessities, but be stuck without any credit after your accounts have been closed due to your bankruptcy filing.
At The Law Office of Andrew S. Trexler, P.C., we offer a free consultation to anyone who is struggling to pay their mortgage, credit card, or other debt. We can advise a potential client whether to stop paying certain debts before filing, whether and when to file, how to prepare the best case possible (that saves the most money or property) and the advantages and disadvantages of waiting vs. filing quickly. Before you decide to withdraw money from your 401(k), or ask for a mortgage forbearance, or skip out on necessities for you or your family to pay a debt, please reach out to us. We are open during the COVID-19 pandemic and scheduling consultations by phone or one of several video conference platforms, and our goal has been and remains helping our clients get the best benefit possible from their bankruptcy cases.