What bankruptcy timelines really matter? The internet is awash with debtors reporting that their attorney has told them they have to wait to file.
They’ve reportedly been told to wait 90 days or 6 months, or ?? from some event to avoid something, they’re never quite sure what.
In the layman’s understanding, 90 days is somehow magic, purging whatever it is that the individual is worried about and rendering it insignificant. That seems to apply, in the hive mind, to using credit cards, withdrawing money from savings, buying a car, making gig money, or paying everyday bills, you name it.
The only statutory references to 90 days that pop to my mind concern purchase of luxury goods on credit (Section 523(a)(2)(C)) or recoverable preferences (Section 547).
Yet, I find my inital interviews with prospective clients are peppered with questions about how long ago stuff happened. Clearly, bankruptcy timelines and bringing oneself inside or outside of those timelines has some real importance.
And so, I took this look at timelines in consumer cases that might answer the question: what are you waiting for? Or from counsel’s point of view, what should you wait for when picking prospective date for filing.
Time periods affecting discharge & dischargeability
The right to a discharge in a case filed within specified temporal proximity to a prior bankruptcy discharge is limited by years between the filing of cases as set out in Sections 727 and 1328(f). Aide memoire.
Note that these temporal limitations don’t limit the filing of a case, only the right to a discharge in a case filed too close to a prior case resulting in a discharge.
One year: fraudulent transfers grounds for denial of discharge Section 727(a)(2)
90 days: Luxury goods purchases 90 days trigger presumption of nondischargeability Section 523(a)(2)(C)(i)(l)
70 days: Cash advances trigger presumption of nondischargeability 523(a)(2)(C)(i)(ll)
Time periods affecting venue
Venue is proper where the debtor has lived for the last 180 days OR the greater part of that period, 91 days. 28 USC 1408
Time periods affecting property of the estate
0 days: The snapshot rule says estate property is assets & rights as of the date the case is commenced Section 541(a)
180 days: Acquisitions by bequest, devise, inheritance within 180 days after commencement Section 541(a)(5)
2 years: Fraudulent transfers made within 2 years of filing Section 548(a)
1 year: Payments on debt owed to family or insiders Section 547(b)(4)(B)
90 days: Payments on debts owed to non insiders Section 547(b)(4)(A)
Who knows: State law fraudulent transfer rights passing to the trustee Section 544
Practice tip: the client’s understanding of a “transfer” is almost always narrower than that of the law. Make sure they consider gifts, grants of lien, quitclaims, or efforts to make title conform to their view of the equitable interests in an asset.
Time periods that impact exemptions
730 days: length of domicile required to use exemptions of the current state Section 522(b)(3)(A)
1215 days: the homestead exemption for property acquired in that period is limited Section 522(p)(1)
Means test
6 months: Income from all sources received and derived during the last six full months Section 101(10A)
Timelines are strategic
What counsel knows that the client doesn’t is that there are lots of time periods that shape the conduct and outcome of a bankruptcy case. And 90 days is just the tip of the iceberg.
Our task then is to build out a bankruptcy timeline for each client that pinpoints the determinative time periods for that client and time the filing with that in mind.
The timeline drives the strategy.
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