If you’re trying to get creditors to stop calling, you may want to change your phone number instead of immediately filing for bankruptcy.
When filing bankruptcy, timing is everything. Waiting just a few weeks could be the difference of having recently transferred property seized or having extra debt tacked on to your bills.
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Here are five situations where it’s better to wait.
1. If you’re going to have more debt soon. When you file bankruptcy, all of your debts leading up to that point are exonerated. But if you know you are going to have an expense in the near future, like a surgery planned months in advance, wait to file until after the surgery is over. If you file before, you will still have to pay the costs of the surgery.
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2. If your income just dropped. When you originally file for Chapter 7 bankruptcy, the court will look to your income over the past six months to see if you have the means to pay off your debts. If you were recently laid off but your previous income was high, you may only be eligible for Chapter 13 bankruptcy, which still requires you pay off some portion of the debt. If you wait to show that your income has significantly decreased, you will be able to qualify for Chapter 7.
3. If you have an unspent tax refund. Wait to file until after you spend your tax refund because once you file, it will become part of your bankruptcy estate and will be used to pay off creditors. But when you use it, make sure you spend your refund on necessities like a mortgage payment, utilities, food, clothing, medical care, car payments or education. If you spend it on anything else, it will affect your case.
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4. If you’ve bought luxury goods within 90 days of filing. If you spend $550 on luxury items within 90 days of filing for bankruptcy, the court will question if you ever intended on paying the debt back. Once you file for bankruptcy, your debt could be denied discharge because of bad faith and you will still have to pay back the debt during bankruptcy.
5. If you’re trying to get rid of student loans. Since the Bankruptcy Consumer and Protection Act passed in 2005, student loans are no longer forgiven in bankruptcy. But more graduates than ever – 13.4 percent – are defaulting on their loans just three years after starting to pay them off, according to the most recent Department of Education Statistics available. If your loans go into collection, stay calm. Don’t panic and file Chapter 7 bankruptcy because it simply won’t help.
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