When It Pays To Wait On Your Chapter 7 Bankruptcy

Once you have decided to file for bankruptcy, you may be eager to get started. However, there are certain situations that call for pausing your actions for a brief time. Read on so you'll know when to wait and when to act.

Luxury Purchase Problems

Credit cards are a large part of why many decide to file for chapter 7. Most credit card debt is completely discharged with chapter 7. Your credit card use before you file could cause you problems, though. It can be seen as fraudulent to use a credit card to buy certain items or take cash advances.

The rules say you cannot use your card to purchase luxury items in the 90-day period prior to a filing. However, if you can show that you used the card to purchase needed items like food, utilities, clothing, and other necessities, you are probably off the hook. However, if you used your card to take the family to Disney World last month, you should be prepared to wait it out so that enough time has passed before you file.

Income Issues

It also pays to be aware of income limits for filing chapter 7. You might have problems filing if your income is higher than the median income in your state of residency. If it is higher, you might be able to file chapter 7 if you can show that you have extraordinary expenses like a large mortgage payment or more.

However, only the last few months of your income are counted. If you expect a reduction in your income in the next several months, consider waiting a few months before you file. Alternatively, consider filing chapter 13, which has no income restrictions, or filing chapter 7 jointly.

Property Disposals

You can reduce your assets before you file for chapter 7 if you follow the rules. Ordinarily, the bankruptcy trustee will search through your financial transactions and identify large sums of money coming into your bank account.

That is because many filers try to avoid losing property through chapter 7 seizures by selling it. To avoid problems with the trustee, consult with your bankruptcy lawyer before you sell an asset. You must be able to show that you used the funds from the sale of the asset to buy things you needed. For instance, you might show that you sold a jet ski to pay for a new refrigerator.

To find out more about how delaying your bankruptcy filing could be a good idea, speak to a bankruptcy lawyer in your area.