Do Not Wait Too Long to File

What happens while you wait

While you are debating whether to file, creditors are not waiting. They are:

• Garnishing your wages. In most states, creditors can take up to 25% of your disposable earnings. That money is gone -- it cannot be recovered in bankruptcy.
• Levying your bank accounts. A judgment creditor can freeze and seize funds in your bank account.
• Filing liens on your property. Judgment liens attach to your real estate and can survive bankruptcy under 11 U.S.C. § 522(f) avoidance rules -- but only if you have sufficient exemptions.
• Repossessing vehicles. Secured creditors can repossess without warning in most states.
• Foreclosing on your home. The longer you wait, the more arrears accumulate and the harder it becomes to save the house in Chapter 13.

The automatic stay stops everything

The moment you file bankruptcy, the automatic stay under 11 U.S.C. § 362 kicks in. It stops all collection activity: garnishments, lawsuits, phone calls, letters, foreclosures, repossessions, and levies. It is one of the most powerful protections in American law.

But the automatic stay only helps if you actually file. Every day you delay is a day your creditors can take your money and property.

When waiting makes sense

There are a few situations where strategic delay is advisable:

• Waiting to satisfy the § 1328(f) time bar. If you had a prior bankruptcy, you may need to wait for the time bar to expire. See 1328f.com.
• Waiting 91 days after a large payment. If you made a preferential transfer, waiting until after the 90-day lookback expires can avoid complications.
• Completing the credit counseling requirement. You must complete an approved credit counseling course within 180 days before filing (11 U.S.C. § 109(h)).
• Timing income for the means test. If your income recently dropped, waiting can improve your means test result.