Are you considering bankruptcy? It might just be one of the best decisions you make this year.
Once you are sure bankruptcy will be right for you, it’s time to start taking steps.
#1) Stop accumulating debt.
You must stop accumulating debt at least 90 days before your bankruptcy.
The creditor will have grounds to object to your bankruptcy discharge if you don’t. They will claim you knew you were going to file and thus never intended to pay them back, essentially accusing you of committing fraud.
If you are one of the 48% of Americans who must use credit cards to cover essential living expenses, you can continue doing so.
Groceries, rent, and utility bills won’t get you into trouble. However, start thinking about how you’ll rearrange your finances to pay for these things during and after the bankruptcy since you won’t have access to those cards any longer.
For many Americans, of course, taking all sorts of debt payments out of the budget is the very thing that gives them the power to stop using credit for basic needs. This may be true for you as well.
#2) Hold on to your property.
Pre-bankruptcy is not a good time to sell property or make large transfers. Selling your car or house very close to bankruptcy is a good way to raise questions with the courts.
Again, if you need to sell some furniture to pay your rent, doing so won’t create problems. We’re talking about “selling” your car to your brother and then planning to get it back from him after discharge. You could face criminal charges for such shenanigans, the trustee might claw back the assets anyway, and you might not be able to discharge your debt.
Such maneuvers are also wholly unnecessary. Many assets can be protected with bankruptcy exemptions.
Exemptions are generous. The vast majority of Newark residents we work with simply do not own enough assets to lose a single one of them in bankruptcy. Take a deep breath, talk to your lawyer, and ask if pieces of property you’re worried about can be protected if you’re not sure.
#3) Gather financial paperwork.
You’ll need a good handle on your income, assets, and liabilities before going into bankruptcy. Gather bank statements, tax statements, bills, deeds, and other financial documents.
Get them all in one place, and bring them with you to your free consultation. You’ll use them to fill out bankruptcy schedules. Your lawyer can also use them to understand your finances clearly and can help you make decisions about filing based on this information.
Gathering everything in advance will help reduce the chances of leaving something out or making a mistake during the paperwork process.
#4) Tighten your budget.
If you’re filing Chapter 13, you’ll spend most of your discretionary income on your bankruptcy plan. It’s a good idea to pare everything down in advance so you’re physically and emotionally prepared to take on the obligation.
Many of our clients have already pared their expenses down to the bone by the time they come to us, but it doesn’t hurt to look one more time. Plus, looking at your budget can help you create a plan for the future.
If, for example, you know that bankruptcy will probably require you to move from your home into a much cheaper apartment, you can start to think about how you will set aside funds to complete the move.
#5) Call a bankruptcy lawyer.
You should not take a step towards bankruptcy without sitting with a lawyer first. Without a lawyer, there’s a good chance your bankruptcy won’t be successful. There may also be additional steps you’ll need or want to take before filing and questions you might want answered.
Ready to file? Thinking about filing? Contact our office to schedule your free consultation today.