Should you delay your bankruptcy petition? Here's what to know.

With credit card debt now surpassing $1.21 trillion nationwide, credit card interest rates hovering close to 23% on average, and other major economic hurdles looming, it makes sense that bankruptcy filings are ticking up quickly. Millions of Americans are drowning in unmanageable debt, after all, and filing for bankruptcy protection can feel like the only available lifeline in many cases. But what many borrowers don't realize is that rushing to file your bankruptcy petition could actually work against you.

The decision of when to file for bankruptcy is just as important as the decision of whether to file at all, though. Bankruptcy rules operate on strict timelines and specific criteria, so a difference of even a few weeks can dramatically impact the outcome of your case. For example, filing too early might mean missing out on discharging medical bills that haven't arrived yet or certain debts that need more time to become eligible. Filing too late could mean losing property to creditors or missing crucial income thresholds. 

That's why you should avoid focusing solely on whether you qualify for bankruptcy and also consider when it makes sense to submit the paperwork. But when exactly should you delay your bankruptcy petition? Below, we'll break down when it could make sense.

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Should you delay your bankruptcy petition?

There are several scenarios in which delaying your bankruptcy filing is not just advisable, but essential, for maximizing the relief you receive. Here are a few instances in which it could make sense to delay your bankruptcy petition: 

You may want to wait if your income recently spiked. Eligibility for Chapter 7 depends heavily on the means test, which looks at your average monthly income over the six months before filing. So, if you received a large bonus, severance package or had unusually high earnings in the last few months, waiting until those high-income months fall outside the six-month lookback period could mean the difference between qualifying for Chapter 7 or being forced into a Chapter 13 repayment plan. In other words, a few months of patience may save you from years of repayment obligations.

It could make sense to delay if you're dealing with major life changes. Some people delay filing for bankruptcy to give themselves enough time to resolve a pending life event, such as finalizing a divorce, selling a home or securing new housing. Filing for bankruptcy before completing those changes can impact things like credit checks, joint debts or property division, so aligning the filing of your bankruptcy with those milestones can help simplify the process.

Waiting could be the right move if you recently acquired assets. Bankruptcy trustees scrutinize recent asset transfers. If you've recently received an inheritance or a tax refund, for example, waiting several months before filing can help you avoid accusations of bankruptcy fraud. Courts look unfavorably on people who receive assets and then immediately file for bankruptcy protection, after all, and doing so could lead to your bankruptcy being denied altogether.

You may want to wait if you recently incurred new debt. The timing can also matter if you've recently incurred new debt or have made large payments to creditors. Charges or unusual payments made shortly before filing, especially if they're made to relatives you owed money to, can raise red flags or be challenged by the court. Waiting long enough to move outside those scrutiny windows may reduce complications and the risk of a creditor objection.

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Why waiting to file for bankruptcy could backfire

While it can make sense to wait in certain cases, delaying a bankruptcy petition can be risky if creditors are escalating their collection efforts. For example, if you're facing potential wage garnishment, a bank levy, foreclosure or a lawsuit, waiting to file may cost you protections that bankruptcy would trigger immediately through the automatic stay.

The interest charges and other fees don't pause while you wait, either. Your credit card balances, medical bills and personal loan debt will continue growing, potentially making the eventual filing less effective. In those cases, a delay without a strategy can mean walking into bankruptcy with fewer options.

This is where your other debt relief solutions may come into play, especially if you're not ready to file but still need breathing room. Options like debt settlement or a structured debt management plan can help reduce your balances or pause collection activity while you evaluate your specific bankruptcy timing. And, for people whose financial situation may improve or who want to avoid bankruptcy if possible, debt relief can serve as a temporary or even permanent alternative to bankruptcy.

In short, delaying bankruptcy only makes sense if you're actively managing the risks during that delay, not ignoring them.

The bottom line

When done strategically, there are cases where delaying your bankruptcy filing can improve eligibility, protect assets and reduce complications. When done passively, though, it can expose you to major challenges, like lawsuits, wage garnishments and higher debt balances.

The smartest approach is typically to view the timing of your filing as part of your overall debt strategy and consider this route alongside alternatives like debt relief and repayment plans. A short delay with a clear purpose can be powerful. An open-ended wait without protection, though, can be costly.