When it May Pay to Wait

There’s an old saying that good things come to those who wait. In our previous post, we explained why you should not wait to address your debt. While this remains true, it’s possible you may be guided to wait as part of a comprehensive strategy planned by you and your attorney. Here are some examples of when you may benefit from waiting:

1. To Protect Assets

In a bankruptcy case, assets are reviewed to determine whether they fall within the exemption limits. Most bankruptcy cases are “no-asset cases” meaning that a trustee has nothing to liquidate to pay creditors. However, sometimes there may be assets with value. When that happens, some pre-bankruptcy planning may be necessary to make the most of those assets. You may not want to rush to file for bankruptcy relief if you are expecting a large tax refund that cannot be protected. The same holds true for money in the bank. Remember, never transfer any assets out of your name leading up to a bankruptcy filing.

2. To Potentially Qualify for a Better Option

When dealing with unsecured debt (not a car loan or mortgage), you may have more favorable options by waiting. Again, this must be done at the advice of your attorney or it may cost you more in the long run (in fees and assets). When negotiating payment options directly with a creditor, your attorney may guide you that an offer is not so great and a better offer will follow if you’re patient. It’s a gamble that only an experienced attorney should guide a client on, but could prove beneficial to a client.

In bankruptcy, waiting may provide the ability to qualify for a better option. If you do not need to file for Chapter 13 relief to cure mortgage arrears, Chapter 7 may be ideal. However, you must qualify for Chapter 7 relief based on income calculations. One calculation, referred to as the “means test,” requires a review of all income received over the last six full calendar months. If during that period, you received a $12,000 bonus, that will certainly skew the results. When calculating the average monthly income over that six-month period, the gross income will be inflated by $2,000. That income figure may not be realistic going forward so it may be beneficial to wait, rather than file quickly when you only qualify for Chapter 13 relief. An experienced attorney can make that initial assessment and guide you on a bankruptcy strategy that may include waiting a period of time before filing.

3. To Obtain Funds for Payment

The most obvious reason to wait may simply be to acquire the necessary funds to pay off your debt in full or at a negotiated discount. Ideally, you have already met with an attorney and reviewed your income and means to repay this debt. An experienced attorney will also question whether you anticipate receiving additional funds over the next 3-6 months beyond your regular income. Whether you are banking on a raise, bonus, tax refund, or repayment of funds you lent your friend, you must realistically assess the likelihood of receiving these funds. If there is a strong likelihood of receiving these funds, it may be wise to hold off on executing the comprehensive debt relief plan laid out by your attorney.

Every case is different so a plan for one person may not work for another. It is important to speak with an experienced attorney who will ask the right questions and present all available options so that you can make the right choice. Always tell your attorney everything. Hiding information from your attorney will only hurt you as these secrets tend to come out at the worst possible time.

If you are facing a financial hardship and need assistance, don’t wait, contact us immediately. At Zimmelman Law PLLC, we are here to help you eliminate your debt with dignity.

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Zimmelman Law PLLC

With over twelve years of experience, Matthew D. Zimmelman, Esq. has helped thousands become debt-free and saved countless New Yorkers from losing their homes in foreclosure. Whether you are an individual or a small business, looking to file bankruptcy or looking to eliminate your debt without filing bankruptcy, we are here to help you get a fresh start.

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