If you’re contemplating filing for bankruptcy, there are some essential do’s and don’ts to be aware of. With nearly 20 years as a bankruptcy law firm, we have key insights on the best steps to take. Here is what we recommend when it comes to preparing for bankruptcy.
The Essential Do’s and Don’ts
1. When preparing for bankruptcy, meet with a lawyer who practices in the area of bankruptcy law
If you are struggling to pay your credit card, house, or car payments, or if you are already behind, I strongly recommend you schedule an appointment with a bankruptcy lawyer. Most lawyers offer a free initial consultation, and the advice you get can often save you a lot of heartache down the road, should you need to file. Meeting with an attorney does not mean you have to file, it just means you’re going to a consultation for advice and to get the lawyer’s recommended course of action based on your unique situation. Just like many people will wait too long to go see their doctor when warning symptoms start to appear, so also do many clients wait too long to get advice from a legal professional regarding their financial situation. I cannot tell you how many people I have met with who have either exhausted all of their retirement accounts, tried to consolidate their debts with some out-of-state company (that ends up taking their money) or have borrowed off their equity in their homes to try and deal with their debt situation. If they would’ve just met with an attorney first they would likely still have their retirement accounts or equity in their home. So don’t feel ashamed if you are considering preparing for bankruptcy and need to meet with an attorney. You’re really just taking proper precautions should you need to file.
2. Don’t do these things prior to filing
There are some activities, generally speaking, you should avoid if you’re considering filing for bankruptcy protection. Some people mistakenly believe that they can protect assets by transferring them out of their name, to a family member or close friend. This is a very bad idea, as in most cases these actions will be considered fraudulent conveyances. If this happens, the bankruptcy trustee can then undo the transfer and seize/sell that asset for the benefit of creditors. You also shouldn’t do a short sale or deed in lieu on any property you own before at least getting some legal advice on the possible tax consequences of these actions. You also don’t want to “run up your debts” prior to filing. Bankruptcy is not there for people to abuse, it is there for people who are struggling, and if the court or your creditors find that you have intentionally run up your debt, with no intention of paying it back, then this can be grounds for denial of that debt going through your bankruptcy, or possibly the denial of your entire case. Some other things to avoid; cashing out your retirement accounts, taking out new loans especially home equity loans, working large amounts of overtime or taking on a 2nd job. While this last suggestion may go against your natural inclination, it may not be wise leading up to bankruptcy. This is because higher paychecks/income levels could cause you to fail the means test and hurt your chances of qualifying for the type of bankruptcy protection you truly need.
3. Do these things if you think you may have to file
There are some things you may want to start doing if you’re considering bankruptcy. Bankruptcy is document-intensive, so your attorney, and in most cases the court, will need to review bank statements, paycheck stubs, tax returns, car titles, and other important documents, so if you can start organizing this information it will make the process much smoother and faster. Along these lines, you should begin compiling a list of all the possible debts you may have. Additionally, you should file any unfiled tax returns, as failure to file your tax returns can be grounds for dismissal of your case. You should also try to stay current with any child support, alimony, or maintenance payments. This is especially true if you need to file for Chapter 13 bankruptcy protection, as failure to make these payments can prevent your plan from being confirmed by the court. It’s also advisable to keep insurance up to date on all of your property, even if you are intending on surrendering certain assets back to the creditors as part of the bankruptcy. Lastly, financial problems often cause considerable stress on married couples which can lead to separation and sometimes divorce. There are many legal considerations in the timing of bankruptcy and divorce/separation, and it’s important to get proper legal counsel on which way to go first. Who knows, it may be that filing for bankruptcy provides so much relief from the stress of your creditors that you stop fighting with your spouse and don’t need to get that divorce after all.
Need Help Preparing for Bankruptcy?
Dantzman & Dantzman bankruptcy lawyers are here to answer any questions you have when it comes to preparing for bankruptcy and what to expect when you do. Contact us today to set up an appointment.