It is tough to make sound financial decisions when the creditors are breathing down your neck. You feel pressurized and consider taking drastic steps that might give breathe life into your finances, but they might also jeopardize your future ability to become debt free.
Finally, after sorting all the options you have decided to file bankruptcy. However, your job is not over after you’ve decided to do so. You have to pay attention to many details. First, hire a bankruptcy attorney and then make a list of the things that are in favor or against you.
Are you on the verge of filing bankruptcy? If yes, then consider these do’s and don’ts:
- Do: Hire a good bankruptcy attorney
Bankruptcy laws are complex, and it’s risky to try to do the process on your own. A bankruptcy attorney knows the in’s and out’s of the bankruptcy laws, and you don’t. Filing for bankruptcy is already scary and filing it alone without legal assistance is even scarier. If you file bankruptcy without the help of an attorney you may find yourself stuck in the cobwebs of a system you don’t understand. So, hire a bankruptcy lawyer before filing bankruptcy. Do your homework and hire a good, experienced lawyer who will meet with you, explain the process, and answer your questions.
- Do: Disclose everything to your lawyer
I know it is embarrassing to reveal everything to your attorney. But, your attorney cannot do his or her job without knowing the real facts, and if there are red flags you want to know them up front. Be honest and share every detail with your bankruptcy attorney. Hiding things may lead you to face unnecessary problems that could otherwise be avoided. You must trust your bankruptcy attorney as they’re working to make you debt free.
- Do: Pay the basic monthly expenses
To take care of your family and to keep the roof over your head, you must pay for your basic expenses like rent and utilities.
- Do: Maintain records
You must keep all your financial books and records intact before consulting an attorney. Maintaining proper financial records will help in your bankruptcy proceeding. Once you have hired an attorney, you need to provide your financial records to him or her. Without good records, your attorney cannot do the job properly and effectively.
- Don’t: Take out a loan from your retirement account
If you have been borrowing money from your retirement accounts to pay the bills, you should stop as soon as you determine that bankruptcy is right for you. If you fail to do so, you’ll be responsible for paying penalties and taxes that might not get discharged in bankruptcy. More importantly, most retirement accounts are protected in a bankruptcy case. A discharge in bankruptcy can eliminate your liability for certain debts and make taking such loans unnecessary.
- Don’t: Hide your assets
Your debts won’t get discharged in bankruptcy if you’re caught hiding assets. The bankruptcy trustee will file a lawsuit against you if he or she discovers assets that you have attempted to hide. So, you should disclose all your assets in the bankruptcy petition.
- Don’t: Transfer property or money out of your name
Transferring assets out of your name just before filing for bankruptcy raises a huge red flag with the bankruptcy trustee and court. Property or money transfers made on the verge of filing for bankruptcy may be considered fraudulent, especially if your motive is to hide your assets from your creditors. So, prior to filing bankruptcy, you shouldn’t transfer assets into someone else’s name or else you’ll be in grave financial trouble.
- Don’t: Talk to your creditors
Once you have filed for bankruptcy, your creditors should stop contacting you. It is the requirement under the law. If they do contact you, tell them to talk to your attorney. If they continue to contact you via phone, email, or mail, forward it to your bankruptcy lawyer immediately.
- Don’t: Repay loans to friends and relatives
Paying back money to friends, family, or relatives within one year prior to filing bankruptcy is considered a “preference.” In fact, any payment of more than $600 to a single creditor within 90 days prior to filing a bankruptcy case can be considered a “preference”. The bankruptcy trustee has the right to recover preferences from the person(s) that you paid and divide it among all your creditors.
- Don’t: Pile up new debt
Incurring new debts within 90 days before filing for bankruptcy is considered a financial scam. Your creditors will be allowed to make the claim that you’ve taken out the loan with no intention of paying it back. If such an objection is raised, you may be denied a discharge of that debt.
These are just some of the do’s and don’ts you should consider before filing for bankruptcy. More importantly, you should seek advice from a good, experienced bankruptcy attorney and follow the advice you are given. If you don’t know who to see, ask around and do your homework on the internet. Look for positive reviews from past clients. Look for positive reviews from other attorneys. Look for someone who makes bankruptcy a primary focus and who has a good reputation.
Today’s post is contributed by Phil Bradford. Phil is a web enthusiast, who loves to share his expertise on money management and money saving ideas. He is associated with many finance and law communities.
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