It's possible to file for bankruptcy too soon
When doing something as important as filing for bankruptcy, everything has to go smoothly.
One problem that can happen, though, is that a business owner files for bankruptcy too early. When someone files for bankruptcy, their assets transfer to the "estate" immediately, and are used to pay back creditors, according to the financial newsletter Slacktax. If some of those assets include stock, then with that transfer will go the stock's tax-deductible losses for the year.
When considering filing late in the year, it's important to keep such a consideration in mind, because waiting a month or two can cost thousands of dollars, the newsletter said. And while it would stand to reason that the filer be entitled to a prorated amount of those losses, this is unfortunately not the case. Bankruptcy law, the newsletter explains, overrules all else governing finances, and the right to claim those losses transfers to the estate along with everything else.
An article in the Orange County Register advised that those considering filing bankruptcy late in a calendar year either wait for January 1 or sell their stock beforehand.
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