When finances are weighing heavily on your mind and you are lying awake at night trying to figure out which bills to pay and which creditors will have to wait, the holidays may be be so cheery and bright. Further, having to make the decision about filing for bankruptcy is never easy and certainly not something you want to do when you are trying to celebrate.
The truth is, however, opting to file for bankruptcy in December, as opposed to the beginning of the following year, can make a difference between whether or not you can file for Chapter 7 or have to file for the longer Chapter 13 reorganization process.
As with everything in life, timing is important. In order to qualify for Chapter 7, also known as a straight bankruptcy, you need to take a Means Test. This is a series of questions asked to determine whether you have the means to pay back your creditors based on your income and debt. If you have the “means” to pay creditors back, you may be forced to file for Chapter 13.
To pass the Means Test, you must not have more income than the median income for a family your size in New Jersey. If you file for bankruptcy before you get cash gifts and employer bonuses, you won’t have to show those sources of income. The Means Test only calculates the six months of income just prior to taking the test. So, income made seven months ago doesn’t count; neither does income made after you take the Means Test.
It’s understandable if you are trying to make the best of a bad situation by trying to avoid the inevitable until after the holidays are over. However, sweeping your debts under the rug may not always be in your long-term financial interest. This is especially true if you know you are up for a bonus this year.
Your best bet is to contact a seasoned bankruptcy lawyer who will explain your rights, answer your questions and help you determine how to proceed to get on the road to better financial health in 2016.
Joel R. Spivack Esq. has been guiding families through the bankruptcy process for over 25 years in Cherry Hill and surrounding NJ communities. Contact him now to learn more about your options regarding bankruptcy and debt negotiation.