Timing Is [Almost] Everything

May 8, 2013 | Category: Chapter 13, Chapter 7

Many people considering filing for bankruptcy in Atlanta, Georgia consult The Rothbloom Law Firm to determine whether to file for bankruptcy.  An equally important consideration is when to file for bankruptcy.  Timing is a critical element in planning a bankruptcy case filing for three reasons: 1) qualifying; 2) asset preservation and exemption planning; and 3) discharging otherwise non-dischargeable debts.

1)  Qualifying

In order to file a chapter 7 “straight” bankruptcy case, most individuals are required to take and pass the “Means Test”, which takes into consideration the individual’s household income and expenses for the six months prior to the month of filing the bankruptcy petition.  Since the Means Test is historical in perspective, periods of unemployment or underemployment, for example, might create “windows of opportunity” for individuals in high-income households to qualify for relief under chapter 7.

The exception to the Means Test requirement is for individuals who have primarily non-consumer debt, including business and tax debt, as discussed here.  If the total of an individual’s non-consumer debt exceeds the total of their consumer debt, the exception applies and the individual is qualified to file a chapter 7 case, regardless of their household income.  Timing can be an important consideration in determining whether the exception applies.  Changes in the structure of an individual’s debt could unwittingly eliminate an individual’s qualification for the non-consumer debt exception and, consequently, the individual’s opportunity to file a chapter 7 case.

Similarly, changes in an individual’s debt structure can also affect whether an individual qualifies for a streamlined chapter 13 repayment plan, or whether they might instead be forced to reorganize under a complicated and costly chapter 11 case.  This is because chapter 13 cases are limited to individuals who do not exceed certain secured and unsecured debt limits.  So, filing the bankruptcy petition  either before or after a foreclosure, for example, might dictate whether the individual qualifies under chapter 13. Timing is therefore also an important factor for individuals filing chapter 13 cases.

2)  Asset Preservation and Exemption Planning

Timing the bankruptcy filing is also critical in preserving assets in bankruptcy cases.  The value of assets on the day of the bankruptcy case filing is critical, because Georgia law provides a limit on the value of the assets that an individual can keep or “exempt.”  So, it might be important to ensure, for example, that all outstanding checks have cleared the bank, and that the month’s paycheck was not paid on the day of the bankruptcy case filing, in order to be certain that an individual can retain and use all of the money in their bank accounts after the case is filed. Careful exemption planning allows individuals to make informed decisions about how and whether to proceed in the bankruptcy process, and helps individuals filing for bankruptcy preserve assets to the greatest extent possible.

3)  Discharging Otherwise Non-dischargeable Debt

Careful planning of the timing of the bankruptcy filing can also be critical in order to obtain a discharge of debts that might otherwise be non-dischargeable, such as income taxes and cash advances, which only become dischargeable after certain amounts of time have passed.  Calculating filing deadlines is fraught with complications, and requires a keen understanding of the law and careful scrutiny of the relevant facts.

Since 1986, The Rothbloom Law Firm has served residents of Cobb, Fulton, Gwinnett, Paulding, Cherokee, DeKalb and all metro-Atlanta counties seeking relief from their business and personal debt. Our attorneys, Howard Rothbloom and Adam Herring, provide thoughtful counseling, careful planning and creative lawyering in bankruptcy cases filed under chapter 7 and chapter 13. Contact us today to discuss whether bankruptcy may be an option to relieve you of the burdens of business and consumer debt.