The bankruptcy process too quickly and postponing it for too long might result in unfavorable consequences. For example, some delinquent income taxes may only be forgiven once they have been in arrears for at least three years. Calculating that three-year timeframe might be difficult, but submitting your taxes too early can be fatal if you have to pay back taxes that, with some careful preparation (and patience), could have been eliminated via a bankruptcy proceeding.

Other reasons are acceptable for filing for bankruptcy as soon as possible, even if it means giving up the advantage of having some obligations, such as taxes, discharged. Consider the following arguments in favor of initiating the bankruptcy process as soon as possible rather than postponing it:

Automatic Stays

The automatic stay provided by bankruptcy may stop several legal actions, including a repossession, foreclosure, garnishment, tax levy, eviction, or litigation. It is common practice for bankruptcy attorneys to sell their services by highlighting that bankruptcy may prevent certain creditor proceedings from taking place. It's a court order that stops your creditors from taking any effort to recover their debts outside of the bankruptcy proceeding, and it's called an injunction.

An automatic stay will prevent a creditor from garnishing a debtor's earnings or bank account. Still, it will not, in most cases, help recover money already given to a creditor before the bankruptcy was filed. An automatic stay may also stop an eviction or the disconnection of utilities from occurring. Nevertheless, there are several limitations:

Your landlord may be able to proceed with the eviction procedure even if they have filed for bankruptcy if they have already secured an order of possession from a court.

When a bankruptcy petition is filed, a utility provider will not be permitted to turn off service, and the provider may even be required to turn the service back on. However, you will need to move quickly to negotiate an arrangement with the utility, which will typically involve providing a sizable deposit to cover the risk that the utility faces.

Moving to Another State

If you file for bankruptcy, you may be able to preserve some property so long as the total worth of that property does not reach a specific threshold. The term "exempt property" may also refer to certain exemptions. The bankruptcy legislation gives governments the authority to determine the kinds of property and the monetary values of those properties its residents are permitted to claim as exempt in a bankruptcy proceeding.

Certain states are more charitable than others. For example, a homestead property in Texas may have an infinite value as long as it doesn't exceed 10 acres in an urban setting or 200 acres in a rural setting. Compare this to the state of Alabama, which only permits a modest exemption of $15,000 in equity in a homestead. However, this figure may be increased to $30,000 if both couples file for bankruptcy simultaneously.

If you were to relocate from Alabama to Texas in the past, you would have been able to take advantage of the significant exemptions that Texas offered to save your Alabama property. Because of changes that Congress made to the bankruptcy legislation, doing so is now far more difficult.

Depending on where you now reside and where you may be relocating, there may be more limitations that apply to your situation. A competent bankruptcy attorney will be able to advise you on the best way to proceed with your case as well as the ideal time to do so.

Job Change

If you have just begun working again after a period of unemployment or joined a job that pays more, you should probably file your taxes as soon as possible if you intend to do so. The Means Test calculates an individual's average income, factors in the state's median income, income for the preceding six months, and the number of the individual's outgoing financial obligations.

If you have just found work and are considering declaring bankruptcy, the longer you wait before doing so, the larger your regular monthly income will be on average. The amount for the typical monthly income may become too high to enable you to file a Chapter 7 case. The same is true whether you receive a better-paid job or a salary boost at your current work. Your average monthly income for the prior six months will increase each month, bringing it to a greater level than the preceding month.