Decisions Made in Setting up Your Bankruptcy Strategy
When you have decided to file bankruptcy there are certain issues that need to be determined prior to your filing. As your Arizona bankruptcy attorneys, we will discuss the strategies involved in filing that will be of the most benefit to you and your spouse or family, if applicable.
Should Both Spouses File Bankruptcy?
When married, one of the things to think about if considering bankruptcy is whether both spouses should file. The fee to file is the same for an individual or a joint case, so costs are not necessarily an issue. Because many spouses obtain credit and owe debt as a couple, if only one spouse files, the other spouse will still be liable to creditors. The automatic stay that keeps creditors from harassing debtors will only be in effect for the one spouse who files.
Joint Filing and Consolidation
When married clients come into our office, we are able to file joint paperwork and schedules. As a result, the amount of paperwork needed to file jointly is less than if the spouses filed two individual bankruptcy cases. Once the joint case is filed, the court makes a decision as to whether to “consolidate” the cases. What this means is that the property and debts of both spouses (whether jointly owned or not) are handled together by the court and the trustee.
Sometimes if one spouse owns more nonexempt property that would be sold off to pay creditors, those creditors might object to the consolidation. When consolidation occurs, the creditors share the money that is distributed from the sale of assets of both spouses. If one spouse has a lot more property available that is not exempt under the bankruptcy laws (meaning it cannot be kept or must be paid for) then the creditors might lose out on getting more money under a consolidated case.
It is best for the spouses to make the decision about joint filing at the beginning of the case. If for some reason one spouse decides not to file at the beginning of the case, but then wants to file shortly after the other spouse filed, he or she can consider filing individually and then request the court jointly administer the two individual cases.
When Not to File Jointly
The most common reason to file separately is that one spouse does not want to be involved in the bankruptcy case. Even if there are advantages to filing a joint case and a spouse doesn’t want to, the other spouse can still move forward and file an individual bankruptcy case.
Sometimes a spouse might not be able to file jointly because he or she has a prior bankruptcy that makes them ineligible. There are times when one spouse may have filed a previous bankruptcy and may not want to join the current bankruptcy petition if there is a possibility that it would be dismissed for abuse. If one spouse has a big priority debt that will have to be paid, it is may be more advantageous to not file jointly.
Because Arizona is a community property state, even if one spouse decides not to be a part of the bankruptcy, most or all of the spouse’s debts and property could be affected whether they join in the bankruptcy filing or not.
Timing of Filing
You may be ready to file bankruptcy right away to get the process started and put in place the automatic stay to end the harassment of your creditors. However, there may be reasons to delay filing. This is an important part of the strategy when we file your bankruptcy. First, let’s discuss why we might file immediately.
In some cases, we will want to file immediately to delay actions such as utility shut-off, repossession, foreclosure, or eviction. It might also be necessary to file immediately to make sure to you avoid the time limits imposed in the statute of limitations if you need to file a lawsuit, for example.
Some of our clients might be expecting to receive nonexempt in the near future that would not be included in the bankruptcy process if filing occurs first. It is important to note however, that some property acquired within 180 days of filing bankruptcy are automatically included in the bankruptcy estate, such as an inheritance.
Delaying the filing of bankruptcy might happen to handle the impact of transferring property before filing. For example, in a chapter 7 bankruptcy your creditors can claim that you intended to defraud them by transferring property within 1 year of filing bankruptcy. So it may be better to wait until a year has passed before filing so that they cannot object to discharging the debt.
Sometimes a client wants to pay back a particular creditor before filing bankruptcy. Perhaps it is a friend or relative. One of the purposes of bankruptcy is to ensure that unsecured creditors have equal access to what money is available for distribution in the bankruptcy process. In this case, the client is not intending to fraudulently transfer the money. But, the client may want to wait to ensure that the trustee doesn’t reverse the payment and include the friend or relative among all the other creditors.
The other issue to consider is if you had property taken away by a creditor that would be exempt from the bankruptcy process. If you did not voluntarily transfer the property, you did not conceal the property, and it would have been exempt, you may be able to get the property back by filing within the year the property was taken away.
The other timing consideration is if you bought any luxury items or luxury services (totaling more than $550) within 90 days before bankruptcy or if you took any cash advances (totaling more than $825). These purchases and cash advances might be considered fraudulent and you might be better delaying filing bankruptcy until after the 90 days. It is still possible for a creditor to challenge the discharge of this kind of debt if the creditor can show fraud on your part.
We encourage you to come into our office to for a free consultation as you consider your bankruptcy options. At Trezza and Associates our representation of thousands of clients gives us the experience you can count on to ensure that you take full advantage of when and how to file your bankruptcy case. We will take the time to educate you on the information you need to make the best decisions to get your fresh financial start. Contact us today in Tucson or Phoenix to learn more about how the bankruptcy process can help you and your family out of financial distress.