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When should you delay your bankruptcy petition?

If you’re thinking about filing for bankruptcy, your debt situation has probably reached crisis level. Perhaps your creditors are calling you on a daily basis, and one or more of them is threatening to sue you. Shouldn’t you see a bankruptcy attorney immediately and receive the protection of the automatic stay?

In most cases, the answer is yes. However, there are some instances where delaying your filing may be in your best interests. Let’s take a look at a few of those cases.

You recently made a large payment to a creditor

A preference payment occurs when you pay more than $600 to a single creditor while you are technically insolvent. For creditors like banks or credit card issuers, the preference period is 90 days before you file for bankruptcy. For insider creditors like friends and family, the period is extended to one year.

Your bankruptcy trustee has the legal authority to approach all creditors who receive preference payments and undo the transaction, which can be especially embarrassing if that party is a friend or family member. If you made such a payment, it might be advisable to hold off on filing for bankruptcy until the preference time frame is up.

You recently transferred money or property

If you give someone a large sum of money or an expensive piece of property within two years before you file for bankruptcy, there is a strong possibility that it may be treated as a fraudulent transfer.

This can happen even if you had no intention of committing bankruptcy fraud. For example, if you try to help a struggling relative by giving them $2,000 and are compelled to declare bankruptcy the following year due to job loss, the trustee could try to reclaim that gift. Although there are defenses that can be raised in this situation, it’s better to avoid a problem in the first place.

You recently took out a cash advance on your credit card

If you take out cash advances that add up to more than $1,000 shortly before filing for bankruptcy in New York, this debt cannot be discharged. The same principle applies to purchasing non-essential items by credit card within 90 days before filing. If you have done either, it may be best to delay your bankruptcy until the deadlines have passed.

You expect your income to go down

Anyone who files for bankruptcy in New York must complete a means test to determine whether they qualify for Chapter 7 or must file Chapter 13. The means test also dictates how long your Chapter 13 plan must be and how much you will have to pay into it.

The means test calculates your average gross income during the previous six months. If you are expecting to be laid off or take a lower-paying job, it may make more sense to wait another six months, to avoid being compelled to file a Chapter 13 case you may not be able to afford.

If you have questions about when you should file for bankruptcy in New York, an attorney can help you make the best decision based on your recent transactions and future concerns. Jayson Lutzky is a Bronx, NY bankruptcy lawyer. Call 718-329-9500 to set up a free in-office consultation. Convenient Saturday hours are available. Visit www.MyNewYorkCityLawyer.com to learn more.

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