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.