Two Reasons Why Your Attorney May Recommend Delaying Filing For Bankruptcy

Starting a business is always a risk, and sometimes it doesn't end well. Read on to find out if bankruptcy is the right move for you.

Two Reasons Why Your Attorney May Recommend Delaying Filing For Bankruptcy

Two Reasons Why Your Attorney May Recommend Delaying Filing For Bankruptcy

14 March 2017
, Blog

When people file for bankruptcy, they're typically looking for immediate relief from their debt problems. Sometimes, though, the attorney handling the case will recommend the petitioner wait to file bankruptcy for a number of reasons. Here are two you may be presented with and why it may make sense to do as your attorney advises.

You Have Assets That Need to Be Protected

Possibly the top reason your attorney will advocate waiting is you have valuable assets that could be taken by the court to pay your debts. Although bankruptcy law does allow petitioners to exempt certain assets up to a maximum dollar amount, the limit may be too low to fully cover the items. Colorado has a homestead exemption of up to $105,000 that can be applied to a house, mobile home, manufactured home, or trailer, for example. If the market value of or the equity in your home is $200,000, the bankruptcy trustee may force you to sell the property and use the other $95,000 to pay your bills.

However, there are certain measures you can take to protect your assets. For instance, you can convert some non-exempt assets (e.g. cash, stocks) into exempt assets (e.g. pensions, household goods). The trick is, though, if you do it improperly or shortly before filing your petition, it may appear to the trustee that you're trying to hide assets, which is a form of bankruptcy fraud. You attorney may recommend waiting to avoid this issue and provide you enough time to make the proper arrangements.

You Can't Pass the Income Test Yet

Another reason you may be advised to wait is you make too much money to qualify for chapter 7 bankruptcy. Your income must be at or below the median income in your state. If you live in Kansas, for example, a 2-person household can't make more than $56,851 per year. When you make more than the maximum amount, the judge may require you to switch to a chapter 13 bankruptcy instead.

You may have inadvertently made more money in the previous 12 months than you realize. This can happen if you worked a lot of overtime, received bonuses, or took on another job. The attorney may want you to wait awhile to see if your income levels off or whether you will have certain allowable expenses (e.g. taxes, health insurance) you can deduct from your income to lower it.

For more information about these issues or help filing a bankruptcy petition, contact a knowledgeable bankruptcy attorney in your area.

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is bankruptcy a smart business move?

America is supposed to be the land of opportunity. What do you do when you try to take advantage of an opportunity that ends up costing you more than what it is bringing in? Sometimes, a business that you start just doesn't work out as you had hoped. It could be that you don't have enough experience or it could be that the market goes bad. Whatever the reason for the business not doing well, you will have to think carefully about your next step. Is bankruptcy the only way to get through this difficult time without losing everything you have worked for?