It is always a good time to consider solving your financial problems, but the fall season is an especially good time to seek professional help. Below are three reasons to consider bankruptcy in the early fall.
Reason Number One: Tax Refunds
When you file Chapter 7 bankruptcy, an accounting is made of all of your property and it is all “placed” into an estate under the control of a bankruptcy trustee. The Bankruptcy Code gives long definitions of what property is included and excluded from the debtor’s estate, but the simple answer is “all legal or equitable interests” you have in property as of the filing date of the bankruptcy petition.
An income tax refund is an entitlement that increases during the year. Since Chapter 7 property is determined by the filing date, filing your bankruptcy before December 31 means that only a portion of your refund is property of the bankruptcy estate. The earlier you file, the less the trustee can get at. For debtors who generally receive large income tax refunds, filing early can exclude thousands from the bankruptcy estate and eliminate the need to use personal bankruptcy exemptions to protect income tax refund money.
Reason Number Two: End of the Year Bonuses
The means test provision of the Bankruptcy Code starts with a six month “look-back” at your income. An employment bonus received at the end of the year will inflate your monthly income, and can either make you ineligible to file Chapter 7 bankruptcy or increase your monthly Chapter 13 plan payment. By filing before the end of the year, your yearly bonus is not included in the initial means test income calculation.
Reason Number Three: A Fresh Start Next Year
The typical no-asset Chapter 7 bankruptcy is over in about four months. By filing your bankruptcy in early fall, you will receive a discharge of your debts and a new plan of financial reorganization around the beginning of the year. A new year and a clean financial slate can do wonders for your future outlook!