When to file bankruptcy is a huge question faced by those who need a fresh start in San Jose and the surrounding areas of the Bay Area. Part of this calculus depends upon what we think you are going to earn from your job in the coming future. Most future events are a maybe in my book. Still, when you are thinking about filing a Chapter 7 or Chapter 13 Bankruptcy, it is important to consider what is going to happen in the near future.
One of these possible events is a new job that his high paying. We’ll tackle this discussion in terms of which Chapter you are going to file. Remember, I limit my practice to Chapter 7 and Chapter 13.
In Chapter 7, there are a couple of places in the bankruptcy petition where you are asked whether you anticipate your income changing in the next year. If you think you are in a position to file a Chapter 7 Bankruptcy during a period of unemployment, then it could be a very wise thing to do. Get the bankruptcy over while your income is low. Eliminate the debt. Get the fresh start you need and use any new job to put savings towards your retirement plan as opposed to old debt.
If you wait until you actually have a high paying job, you will have to disclose this to the bankruptcy court. This can cause your Chapter 7 many difficulties as the Bankruptcy Court does look at your ability to pay back your creditors. You could be forced into Chapter 13 if you have a job that shows too much money at the time you file.
If Chapter 13 is your choice, then you are going to have to show regular income anyways. Regular income need not be dramatic income, however. But your Chapter 13 does last for a bit of time as it could be up to 5 years that you use the Bankruptcy Code to protect your financial assets. If, during your Chapter 13 plan, you receive a new job that drastically increases your income, the Chapter 13 Trustee is likely to see this on your pending tax returns.
If you filed bankruptcy with a $60,000 year salary and show returns of $70,000 or so, I’m not certain you’ll receive any objection from the Trustee. Start showing $120,000 on your tax returns and you’ll likely see a Trustee’s Motion to increase your plan payments.
In either Chapter, the potential for future income is often part of the discussion a good attorney will take you through. Depending on your situation, it could be an important factor that will again, like most factors in bankruptcy, either save you tens of thousands or cost you tens of thousands.
Don’t skimp on your attorney.