When to file a bankruptcy......later

There is no question that it is not easy to find yourself in a position in which you need to file a bankruptcy. My clients often feel hopeless, overwhelmed, and scared prior to the filing of their bankruptcy petition. Almost always they are impatient. Many of my clients share the sentiment that they "just want to get this over with" so they are able to move on with their lives...and this is the purpose of bankruptcy. To allow individuals a way out so that they can restructure their financial lives and get a fresh start.

However, there are many strategic reasons that people should stop and evaluate prior to rushing to file their petition. I will take a moment to review just a few considerations, although this is certainly not an exhaustive list:

1. Ask yourself, could it get worse?

I typically tell my clients that they want to believe the worst is behind them prior to the filing of a bankruptcy petition. I realize that none of us has a crystal ball to see the future. However, if you are coming up on the end of unemployment or believe that a layoff at work is imminent a delay in filing may be appropriate. This is true because if you have a loss of income you may incur additional debt and debt incurred after the filing of a bankruptcy is not discharged.

2. Are you entitled to an income tax refund?

If you are entitled to an income tax refund, or will receive one shortly it is likely a good idea to delay the filing of your bankruptcy petition until you have received and spent the refund funds. This is true because if you file a bankruptcy petition prior to the receipt of an income tax refund to which you are entitled the trustee may be able to take a portion or even the entire refund. It is probably worth waiting to be able to use that money on something that you or your family truly needs such as a car repair, a new mattress to replace the one you have that is 20 years old, a medical procedure, etc. So, if it is tax time talk to your attorney about how to protect your refund.

3. Do you owe income tax?

Income tax is sometimes dischargeable. However, the taxes must be filed and you must have owed the tax for a period of time prior to filing. The rules on whether income taxes are dischargeable in bankruptcy are complex and should be discussed with your attorney, but if waiting a few months to file could discharge income tax it should certainly be considered.

4. Did you receive a large bonus in the past 6 months?

Consumer bankruptcy takes your last 6 months of income into consideration in order to determine what type of bankruptcy is most allowed. If you have had a large bonus over the last 6 months it may skew your results to show that you should have enough money to pay into a Chapter 13 repayment plan when the reality of your day to day finances is that you are spending all of your income on reasonable living expenses. A delay may be considered in this situation so that the bonus "falls off" the last six months, making it more reflective of your future earnings.

5. Are you about to welcome another family member into your home?

Consumer bankruptcy under the post 2005 bankruptcy laws considers how much money you should have left at the end of the month after paying living expenses. The expenses are based on averages for the nation, your state and your county for your family size. Not surprisingly, the more people in a family, the more the average expenses cost. Therefore, if you are about to have another baby it may make sense to delay filing until he or she is born so that your additional family member is taken into account for purposes of your living expenses.

While I could probably go on through about 10 more reasons, the point is that there are many factors that must be considered when deciding if it is the appropriate time for you to file a bankruptcy petition....and that most appropriate time may not be tomorrow. So, try to be patient even though you would prefer to "just get it over with" because waiting may be beneficial.

It is OK to say no to kids

I meet with individuals every day who are struggling with their finances. In my meetings with hundreds if not thousands of people I have noticed a consistent theme.

KIDS CAN BANKRUPT YOU!!

Now I am not advocating against having kids, I am urging parents to rember the power of the word "no." I have had far to many clients tell me that they are spending thousands of dollars each year on hockey, gymnastics, or a number of other activities. If I point out that the cost is not necessary and suggest removing it from their expenses I often receive the same reaction...."We could never do that little Sally just loves it."

I urge parents everywhere to make a budget and see if your children's wants fit in after necessary living expenses are taken into consideration. If there is room in the budget feel free to send jr to baseball camp. But if the money isn't there explain to jr that baseball camp isn't in the cards this year. It is not only an opportunity for parents to stay on track financiall, it is a great lesson for kids that money is a fixed resource. Perhaps jr can work to pay for the camp himself (if he is old enough) or perhaps he plays baseball in the back yard this summer. Whichever occurs, saying no if there are not enough funds will maintain your family's financial health and teach your child financial responsibility as well. So, don't be afraid to say no to your children.

Introduction

Allow me to introduce myself. My name is Erika Singler and I am an attorney licensed in Indiana. I am a partner in the law firm of Halcomb Singler, LLP, in Carmel, Indiana. (www.halcombsingler.com). I concentrate my practice to the areas of bankruptcy, personal injury and civil litigation. However, I wanted to focus this blog on bankruptcy because I am passionate about helping people be able to emerge from bankruptcy with good financial habits that will keep them out of bankruptcy in the future. Stay posted for futher entries on everything from Indiana Bankruptcy law, making sure your kids don't cause you to need to file for bankruptcy, living on cash, needing/wanting less stuff, and what not to do if you think you may need to file a bankruptcy.

***Please be advised that nothing in this blog should be considered legal advice. In order to give legal advice it would be necessary for me to meet with a person and have a full picture of their assets, debts, income, expenses, and other information necessary for me to come to an opinion.