Time Your Bankruptcy Filing For Best Results (Timing Is Everything)

The timing of your bankruptcy filing can significantly impact your financial outcome, depending on the time of year. Choosing when to file can affect your:

• Tax refunds
• Income calculations for the means test
• Asset exposure
• Seasonal expenses
• Creditor actions (like garnishments or foreclosures)

Let’s break down the advantages and disadvantages of filing during different times of the year:

🧾 January–February: Wait for Your Tax Refund

✅ Advantages:

• You can receive and spend your tax refund (on allowed expenses) before filing, protecting that money from the trustee.
• Filing after spending the refund reduces the chance of losing it to creditors in Chapter 7.

❌ Disadvantages:

• If you file before you get your refund, it may become part of the bankruptcy estate.
• If you’re in a rush to stop garnishment, you may not be able to wait.

💼 March–May: Best for Managing Tax-Related Issues

✅ Advantages:

• By now, you’ve likely filed taxes — your income is clear for the means test.
• You can plan exemptions around your tax return and other seasonal expenses.
• Trustees are often more familiar with recent tax returns and can process cases efficiently.

❌ Disadvantages:

• If you still have a refund that hasn’t been spent properly, it could be at risk.

☀️ June–August: Good for Income Planning

✅ Advantages:

• If you earn less during summer (like teachers or seasonal workers), you may pass the means test more easily.
• You may have already spent your tax refund and can plan your filing based on your current income and assets.

❌ Disadvantages:

• If you’re behind on summer expenses (like travel or childcare), it may complicate your budget or raise red flags if you spent on luxuries before filing.

🍂 September–October: Year-End Strategy Planning

✅ Advantages:

• It’s a good time to review annual income for the means test.
• You can file before holiday spending or before collecting year-end bonuses, which might count as income or increase your assets.

❌ Disadvantages:

• If you expect a bonus, inheritance, or other asset before year-end, it could be considered property of the estate.

🎄 November–December: Caution Around Holiday Spending

✅ Advantages:

• You may qualify for Chapter 7 based on year-to-date income.
• You might be able to avoid creditors through the holidays by filing before year-end.

❌ Disadvantages:

• Holiday debt and gifts may be scrutinized — if you run up credit cards shortly before filing, creditors may object and claim fraud.
• You may miss out on next year’s tax refund if the trustee claims it in advance.

📌 Summary: Best Timing Depends on Your Goals

Goal	Best Time to File
Keep your tax refund	February–March (after receiving and spending it)
Pass the means test	During low-income months (summer or fall)
Avoid losing bonuses	Before receiving the bonus (early fall)
Avoid credit card fraud claims	Wait 90 days after large purchases
Stop garnishments or repossessions	File as soon as needed (timing less important)