Bankruptcy: What to do prior to filing.

So you want to file for bankruptcy? Before you file, there are some things you need to know. Many people who file for bankruptcy don’t realize that there are federal laws that prohibit you from doing certain things before you file. Violating these rules may lead to your bankruptcy case being dismissed. A dismissal allows your creditors to continue collecting on your debt. Follow these steps in preparing for filing for bankruptcy.

Do Not Transfer Property to Family

Don’t do it. Transferring your car or your real estate to anyone prior to bankruptcy may violate several laws. The court has the ability to declare that those transfers were fraudulent. This can have a serious impact on both you and your family. Bankruptcy courts will “look back” over your finances for a period of time prior to your application to make sure you are not misleading your creditors or hiding assets. Not only could this type of activity result in your debt not being discharged, but you may be guilty of a crime.

File Your Tax Returns

Federal and state governments are heavily involved in the bankruptcy process. Failure to file your tax returns may result in tax liens and a more thorough examination of your bankruptcy application. As a result, failure to file your tax returns can also delay your bankruptcy proceeding. The trustee has the ability to prolong or even dismiss your case for failure to file tax returns.

Don't Run Up Your Debt

There are some people who decide, prior to filing for bankruptcy, to intentionally incur additional debt that they have no intention to pay for. This is fraud. The court has the ability to declare that you will still be on the hook for that debt. Furthermore, you could be investigated for criminal proceedings.

Gather Financial Paperwork

For each debt that you owe, you should begin preparing any documentation related to those debts. For example, if you owe credit card debt, obtain the credit card agreement and a statement of accounts. If you have a mortgage, get your mortgage agreement and an accounting of how much is remaining on your mortgage. It is also important to obtain proof of income for your family members such as paystubs and tax returns. This information will be invaluable for your attorney and will save time.

Contact a Lawyer

Bankruptcy is a complicated process. As evidenced above, creditors have a number of opportunities to examine your finances. If you have been moving debt around or incurring additional debt, you may not be eligible for a discharge and could remain on the hook for the debt. Therefore, it is important that you speak with a lawyer to avoid these, and other, mistakes.

Different Types of Chapter 7 Bankruptcy

Chapter 7 - No Asset

There are two major types of Chapter 7 bankruptcies. Each type has its own unique procedures. A "no asset" case is one in which you are allowed to keep all of your personal property. Each jurisdiction has laws called "exemptions" which allow you to keep specific types of property, such as tools used for your business, clothes and household goods. A no asset case is the quickest type of bankruptcy, as the court does not have to sell off any of your property.

Chapter 7: Asset Case

Not all property is exempt. If you own non-exempt property, you have an asset case. For example; you have an asset case if you are gifted a speed boat valued at Twenty Thousand Dollars ($20,000.00). It would be unfair to allow you to keep this luxury item without paying your creditors. In certain circumstances, that speed boat would either need to be sold by the court or you would have to pay for the value of the boat to keep it. This is an asset case, and these cases can be very complicated.

Why you need a lawyer.

A bankruptcy lawyer will be more familiar with the exemptions where you live. A lawyer will be able to help you maximize the amount of property you are allowed to keep as part of your bankruptcy proceedings. Contact a lawyer in order to get more information regarding the type of bankruptcy that is best for you.

Bankruptcy Basics: Chapter 7 and Chapter 13

WHAT IS BANKRUPTCY?

Do you have credit card bills? Are utilities going unpaid? Are you afraid of being evicted or losing your home? If you answered yes to one of these questions, bankruptcy may be right for you. Bankruptcy allows you to get a fresh start by removing your personal liability for certain types of debt. Bankruptcy can be a long process or a short process, depending on your income and the amount of property you own. The two most common types of bankruptcy are Chapter 7 and Chapter 13. 

CHAPTER 7 BANKRUPTCY

A Chapter 7 bankruptcy is available to you if you make below a certain amount of income. This type of bankruptcy is a relatively fast process, and typically takes one to four months. There are two subtypes of a Chapter 7 bankruptcy that I will talk about at a later time; asset cases and no asset cases. 

CHAPTER 13 BANKRUPTCY

A Chapter 13 bankruptcy is a much longer process than a Chapter 7 bankruptcy. This type of bankruptcy is for you if you make above a certain level of income. This type of bankruptcy can take between three to five years to complete. You set up a payment plan with the court during this type of bankruptcy, and that payment plan is used to pay down your debts.

WHY YOU NEED A LAWYER

Bankruptcy is complicated. There are dozens of documents that need to be filed with the court and several things you must do before you can qualify. If you fail to properly complete the paperwork, your bankruptcy may be dismissed and you may still be on the hook for your debts.

You also need a lawyer to help you determine which type of bankruptcy is best for you. If you are considering bankruptcy, contact a lawyer.