Once you’ve made up your mind to file for bankruptcy protection, a common question is – when to file?

The simple answer is: when you’re ready. By the time you have arrived to the conclusion that your best choice is bankruptcy, there is usually little reason to delay; you have by that point already overcome the emotional and personal hurdles in making the decision to file. Often, the biggest timing issue at that point is getting your documentation and attorney’s fees together so that the case can be properly prepared and filed.

Sometimes, though, there are very real legal issues that necessitate precise timing in the filing of the case. The filing of the case does several things, including:

  • Creates the “automatic stay,” preventing the vast majority of creditor collection activity. If you are about to lose your house to foreclosure, filing quickly is of paramount importance.
  • Creates the “bankruptcy estate,” a snapshot at that moment in time of all of your property and debts. Because many clients’ assets are in flux to some degree, timing the filing of the case to properly “exempt” (protect) those assets from creditors is one of a bankruptcy attorney’s main duties.
  • Establishes a date from which several “lookback periods” emerge, allowing the bankruptcy trustee and certain other parties to reach back in time and alter, undo, or recharacterize past transactions. Your attorney will let you know if any of these lookback periods apply to your case and advise you on the timing issues accordingly.
  • Creates deadlines and future events in the case, such as the meeting of creditors and other key dates. Sometimes, practical considerations such as a client’s unavailability during an extended period of time create a reason to file either sooner or later than anticipated.

Therefore, the timing of the filing has a potentially substantial effect on several issues and your specific situation may dictate a quicker or more delayed filing based on these and other issues. In many ways, while the choice of bankruptcy chapter is often dictated by the facts of your case, the timing of the filing of the case is one of the few elements of the process that is under your precise control – and bad timing can have devastating consequences, including loss of court protection, loss of property, and the unwinding of past transactions. Therefore, make sure you get competent legal advice before you inadvertently file an ill-timed case.