Usually, WHEN you file your Colorado Springs bankruptcy case doesn’t make much difference, but in certain cases it can make a HUGE difference in the relief you receive.
As a Colorado Springs Bankruptcy Attorney, it’s not unusual for me to meet with potential clients who may be forced to start their cases immediately in order to stop a garnishment of their bank account or their wages. If they had only come in sooner, we probably could have avoided this situation. You should do your best to avoid being put in that position, so that you can file your case at the time when it will be most advantageous for you.
a. Will it be a Chapter 7 or Chapter 13?
Back in 2005, Congress changed the bankruptcy laws to make it more difficult for people to use Chapter 7. Since then, if your household income is greater than the median income for a household of your size in your state, you are required to take the “Means Test” in order to determine whether you qualify for a Chapter 7. The means test requires you to compute your gross income for the previous six months. That will be used to determine whether your income is greater than the median.
The issue of timing comes in to play with people whose income varies from month to month, or who have received a bonus or have been recently laid off, terminated or retired. Though it’s not as common as it used to be, here in Colorado Springs, it’s still not unusual for people to receive annual bonuses. If the bonus was received during the six-month period before the time you want to file your case, that bonus will be included in your income for the means test.
When bankruptcy attorneys are faced with that situation, they will often recommend holding off on filing until the bonus is more than six months past. That way it will not be used in calculating the income for the means test.
The problem is that if you are forced to initiate your case immediately, you may not qualify for a Chapter 7 and may end up with Chapter 13 as your only option. This could end up costing you a lot of time and money.
b. Recently incurred debts.
If you’ve recently used a credit card or visited one of our many Colorado Springs payday lenders, you probably want to wait until at least 90 days have passed before you start your case. Otherwise those debts may not be discharged. What happens is the attorney for the creditor can object to the debt being discharged.
So, even though you listed the debt in your bankruptcy, you may still be stuck paying it. This can be avoided just by waiting and giving the debt some time to “age” before filing your case.
c. Which exemptions will apply to you?
In order to use Colorado’s exemptions, you must have lived here for at least two years. If you haven’t lived here for at least two years, we have to look at where you were living two years ago. And, if you lived in that state for at least 91 days, that would generally be the state whose exemptions would apply to you.
Often, however, in order to claim a state’s exemptions, you must be a resident of that state. In that case, where you can’t use Colorado’s exemptions or the other state’s exemptions, you’re not totally out of luck. You can probably claim the federal exemptions. That’s usually a good thing since they are fairly generous.
In order to make sure that you maximize your exemptions, you will need to consider the timing of the filing of your case.
Okay, so what should you do if you get sued? How do you avoid a judgment being entered against you?
You should contact a competent bankruptcy attorney as soon as you’ve been served with the Summons and Complaint so that you can determine a strategy in order to delay the entry of a judgment against you. If you are here in Colorado Springs, or nearby, please feel free to give me a call. The sooner you get this advice, the more likely your lawyer will be able to provide you with a suitable strategy for dealing with the case.
That way you can file your bankruptcy case at a time that’s good for you.