Eight Essential Tips for Filing for Bankruptcy November 23, 2015

Prepare for Your Financial Fresh Start

Bankruptcy is oftentimes viewed to be the result of frivolous spending and being financially irresponsible. While this is sometimes the case, the truth of the matter is that filing for bankruptcy is simply a legal means of reorganizing or purging debts in order to bring about a fresh financial footing. Further, filing for bankruptcy grants protection to individuals and business entities under the United States Bankruptcy Court. If you’re considering bankruptcy, consider these eight pointers prior to filing any paperwork.

  1. File Your Income Tax – Neglecting to file your income tax returns can be quite detrimental to your case if you plan on filing for bankruptcy. Your tax returns allow you to ascertain your current and past earnings as well as enumerate your asset holdings. If you do not file, there’s no way to solidify your tax obligations, which means your bankruptcy case will likely be dismissed.
  2. Fill Out Paperwork Completely – When filing for bankruptcy, it’s highly important to fill out all paperwork completely and accurately. Be sure to be 100% truthful when including information about your debts, assets, monthly income, expenses and financial history. Choosing to skimp on any of these details could prompt the bankruptcy court to dismiss your case and deny discharge.
  3. Don’t Accumulate New Debt ­– If you’re planning on filing for bankruptcy, steer clear of taking out a loan or cash advances anywhere between 70 and 90 days before you file. Doing so will appear fraudulent and likely cause your creditors to object to discharging your debt. Further, do not purchase any unnecessary luxury items costing more than $600, especially with a credit card.
  4. Put the Credit Card Away – Using credit cards can be a sure-fire way of accumulating new debts, especially if you’re already experiencing financial hardship. If you’re considering bankruptcy, it’s a wise decision to refrain from using a credit card for purchases within 90 days of filing. If you do use a credit card and file anyway, you’ll want to contact a bankruptcy attorney to determine what to do next.
  5. Don’t Pick and Choose Which Loans to Repay ­– Choosing to selectively repay loans within 90 days of filing for bankruptcy will likely be viewed as a preferential transfer and cause the bankruptcy trustee to seek to collect the funds you paid to be equally dispersed among all your creditors.
  6. Know What Debts Are Dischargeable – Depending on the chapter under which you file for bankruptcy (e.g., Chapter 7, Chapter 11, Chapter 13), some debts may be no-dischargeable. Under Chapter 7 bankruptcy, student loans, criminal fines/restitution, debts from fraud, recent taxes and family support will not be discharged. Under Chapter 13, family support, drunk driving judgments, student loans, non-filed taxes and restitution are non-dischargeable. To learn more about dischargeable debts, it’s wise to contact a reputable bankruptcy attorney.
  7. Hold on to Your Retirement – People work too hard to save for their golden years, which is why it’s very wise to forego using your retirement savings to pay your creditors. After filing for bankruptcy, these funds are protected.
  8. Keep Car & Mortgage Payments Current (if possible) – If your car and mortgage payments are current, you can elect to reaffirm those debts and keep either or both. This is true in both Chapter 7 and Chapter 13 bankruptcy. If you are not current, you limit your options in bankruptcy, as a Chapter 7 bankruptcy filing will not force the note holder to allow you to keep the car or home. Bottom line, if it comes down to the car or home payment being made or credit card payment, make the former.

These tips are by no means a comprehensive list of what to keep in mind when filing for bankruptcy. If you’re considering bankruptcy, you need to know what your options are, and that’s where the bankruptcy attorneys at Hayes, Berry, White & Vanzant come in to play. Don’t hesitate to contact us today at (940) 387-3518 (or here) for assistance with filing for the appropriate chapter of bankruptcy and achieving a fresh financial start. We’ll be glad to help you out in any way we can!

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Richard D. Hayes

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