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Bankruptcy - when to fileWhen to file a bankruptcy petition depends on your predicament. General bankruptcy practice is to file a petition when your financial condition "bottoms out" or is at the worst point that it can conceivably reach. There are three categories of bankruptcy filings: EMERGENCY: This action is taken to stop a foreclosure, repossession, prevent a lien or judgment. In this situation you’ll need to file a one-page petition and pay the filing fee. The filing of the petition invokes the "automatic stay," which stops or prevents these actions. You must file the remainder of the bankruptcy paperwork with the court within 15 days or your case will be dismissed. ROUTINE: Here, you have financially "bottomed out" but there is no immediate urgency to file. Your complete bankruptcy package can be completed and filed in a normal fashion. PLANNED: This is a filing where "exemption planning" has, or will, occur to protect as many of your assets as possible. The filing also may be planned to coincide with other significant events (FOR EXAMPLE: You will lose support payments in six months and you want an "exemption plan" for that event.). Again, a qualified bankruptcy attorney can help you get the most legal benefit from your bankruptcy filing. The three most common types of bankruptcy are Chapter 7, also called "liquidation", Chapter 11, also called "reorganization", and Chapter 13, known as a "wage earner's plan". Chapter 11 or reorganization is a complicated form of bankruptcy used primarily by businesses. Chapter 7 bankruptcy will require you to sell your assets, excluding your home, to pay off your creditors. After the liquidation sale, your slate is wiped clean, while a Chapter 13 will require you to make payments over as many as 5 years to pay off your creditors. |
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