Waiting Until After the Holidays to File Bankruptcy Can Be Risky

TRI Writer • December 13, 2019

You’re overwhelmed by debt. You’re barely scraping by, and you’re deciding who to pay when you receive your paycheck based on how past-due the account is and how upset the creditor is about the past due status. You know that you don’t have many options left, and you need to file for bankruptcy, but you don’t want to do it before the holidays. Is it risky?

Waiting to File Bankruptcy:

If you are waiting to file bankruptcy until after the holidays, we highly recommend you sit down with an experienced attorney as soon as possible. You can still decide to wait until after the holidays once you’ve gone over your situation with the attorney. But they can give you all the appropriate information and help you determine if you run any risks by waiting.

Potential Benefits to Seeing a Bankruptcy Attorney Now Instead of Waiting Until the End of the Year:

Bankruptcy is full of rules, and many of the rules apply to timing. When those rules are applied to your specific situation, some could provide you with some advantages available by filing sooner (or simply avoiding disadvantages that would come from filing later). Delaying filing in some cases could result in serious harm. Still, unless you speak with an experienced bankruptcy attorney about the scenario, you may not realize it until it’s too late.  

The Means Test’s Quirky Income Timing Law:

The bankruptcy means test determines whether or not a filer is eligible to file for Chapter 7 bankruptcy. The means test is based on the income of the filer and their “means” to pay back their debt. The easiest way to pass the means test is to have an income less than the published median income for your state and family size. Potential benefits become apparent when you consider the “timing” in combination with two specific elements of the means test.

  1. Income counted for the means test is all income from all sources (including gifts and bonuses), and
  2. the time period used to gather income information for the means test is the last 6 FULL calendar months before the date you file bankruptcy.

This excludes income that is received the month your case is filed. For instance, if you receive a significant bonus from your employer on December 10th, and you file before or on December 31st, that bonus will not be counted as income for your means test. Similarly, if you receive a cash gift from your parents to help you pay for Christmas gifts for your kids on December 1st, and you file before or on December 31st, that gift will not be considered income on your means test. The income considered for the means test would be from the last 6 FULL months, so if you file on December 31st, the income considered would be pulled from June through November. Since the holidays are a time of gifts and bonuses, this timing quirk can be very beneficial.

Filing Before the End of the Year:

This is just one example of the potential benefit of filing before the end of the year. Get in touch with an experienced bankruptcy lawyer to discuss your situation specifically to find out the best time for you to file bankruptcy.

If you have other questions about when to file bankruptcy or if you need help filing bankruptcy, please don’t hesitate to get in touch. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one in Chattanooga with two. You are in good hands with Kenneth C. Rannick P.C.

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