Posts Tagged ‘filing for bankruptcy’

11 Things You Must Do Before Filing For Bankruptcy

If you are considering filing for bankruptcy, you have to be very careful on how you have to go ahead with the process. Always remember, a single wrong move can turn out to be a huge disaster. The decision-making in this regard is not an easy task. It is very important to note that the already difficult process of bankruptcy has become much more complex with the introduction of the Bankruptcy Reform Act 2005. Even a small wrong step can make your case highly complicated, which eventually can even make the desired relief highly expensive, and sometimes, even impossible. Following is a brief rundown on eleven things that you must do in order to make sure you do not end up getting into a worse situation than you are currently in, and that everything goes as smoothly as possible.

1. Get Yourself Informed About The Process

Even if you are planning to hire a lawyer to look after your case while you are filing for bankruptcy, you are strongly recommended to get yourself educated about the legal proceedings related to these types of cases. You can find a wealth of articles in the of this website. Going through all those articles will get you a clear picture about the process. In general, you have to file either under chapter 7 or chapter 13. For this, you are required to go through a compulsory means test and credit counseling. The result of the means test and the report submitted by the credit counselor will decide whether you qualify for chapter 7 or chapter 13 filing. For example, if your income (after deducting the necessary expenses) is less than the , you can file under chapter 7, as per which all your assets and properties (except those that come under exemptions) will be sold off and the money thus obtained will be used to settle your debts. Chapter 13 filing on the other hand does not involve any such thing. You can keep all your assets and properties, but you will be made liable to repay your debts as per the new (more affordable) repayment plan as per court order. Always remember, the more informed you are about the process, the better decision you will be able to make. You will also be able to discuss your case more knowledgeably with your lawyer.

2. Explore Alternative Options

Filing for bankruptcy must be the last option for you, not the first choice. You should go for it only if there are no available out there. For example, if you already have very few assets and little income, there is no sense in choosing bankruptcy to get relief from your debt problems. In such cases, you are already “judgment proof”. Even if you do have something to lose, you should first try to negotiate a debt settlement or repayment proposal with your creditors. You can explore many other options by visiting the section .

3. Do Not Use Fund From Your Retirement Accounts To Pay Off Your Debts

If you have decided that you are filing for bankruptcy, it does not make any sense at all to keep making the repayment on those debts that are going to be discharged as part of the process. Using your retirement accounts for this purpose is the worst financial move you can ever make. It is very important for you to keep in mind that the fund from your retirement is completely safe even if you go bankrupt under chapter 7. So, leave this money alone, as you will need this money to get your finances back on track after the court declares you bankrupt.

4. Prepare A List Of Debts That You Owe To Different Creditors

The next thing you have to do is to get a clear picture on how much money you have to pay to different creditors in repayment of the debts you owe to them. You will have to attach this list while you are filing for bankruptcy. So, prepare a list that should include the amount of debt, the name of the creditors, and other such details. You will also need this list while you are consulting with an attorney.

5. Obtain Your Credit Report And Review The Details Provided In It

Obtain your credit report from the three major credit bureaus (TransUnion, Experian, and Equifax). Do a thorough analysis of the details provided on the reports. If you have missed some debts, you can find the information in these reports. Here are the three .

6. Gather Necessary Documents

There is a ton of paperwork that you have to complete as part of the process. So, roll up your sleeves and gather all necessary documents. You will need to bring the following documents to your attorney.

- Identity proof, which can include Social Security card, driver’s license, or any other such thing.

- Court notices or legal papers that you have received, such as child-support orders, divorce decrees, alimony orders, wage garnishments, judgments, and lawsuits

- If you have been granted bankruptcy in the past, you will need to gather all those legal documents related to that.

- Tax assessments or home appraisals related to any real estate property that you own

- Lease contracts, if any, such as for cars or apartments

- Loan contracts, where you are making the repayments in a timely manner, such as for home mortgage or car loan

- Any letter or notices you have received in connection with your debts, such as letters from collection agencies

- The most recent bills, including the ones you have paid and also the ones that you have not paid

- Statements for all types of retirement accounts that may include 401(k)s, Roth IRAs, and IRAs

- Tax return forms for at least the last two years

- Bank statements for at least the last six months

- Salary slips or pay stubs for the last 6 months

7. Choose A Reputable And Experienced Attorney To Discuss Your Case

When it comes to filing for bankruptcy, you may not be able to deal with the complex legal procedure on your own unless you are an expert in this field of law. So, the next step is to consult an experienced attorney, the one who is reputable and has an impressive success record. Considering the very fact that there are so many lawyers available out there, you may find the task of choosing the best bankruptcy attorney a difficult one. You can start by contacting the National Association of Consumer Bankruptcy Attorneys or the Bar Association in your state; these organizations can provide you some good referrals. It is important to note that many reputable attorneys offer the initial consultation free of cost. If you manage to locate such lawyers, it can be your opportunity to discuss your case with several top-rated attorneys and then choose the best one out of them by comparing the legal advice they offer.

8. Take Immediate Action If Bankruptcy Is The Right Choice For You

If after discussing your case thoroughly with an experienced lawyer, you find out that filing for bankruptcy is the right choice for you based on the kind of financial situation you are in, you must take immediate action and file your petition as soon as possible. It does not make any sense at all to keep waiting or keep dragging your heels and struggling with debts that you know you are not able to pay. Get help from your attorney and start the procedure immediately. Any unreasonable delay will only make your case more complex and damage your finances furthermore.

9. Stop Making Repayment Towards Those Debts That Are Going To Be Discharged

When court grants you bankruptcy, most of your debts get discharged as part of the process. Therefore, now that you have filed your petition, it does not make any sense to throw away your hard-earned money for the repayment of those debts that are automatically going to be eliminated soon. Such debts may include payday loans, medical bills, and even credit cards. Likewise, if you know that some of your assets and properties are going to be sold off, such as your car or home, you should stop making payments toward the related car loan and mortgage as well (unless making those payments allow you to keep those assets). However, before you stop making these payments, make sure you get advice from your attorney first; your attorney may have a better plan for you.

10. Do Not Make A Big Financial Move Without Consulting Your Lawyer

You are strongly recommended not to make big financial moves without your lawyer’s advice. For example, any asset or property that you buy within three months after filing for bankruptcy may not be exempted. Therefore, it is not wise at all to make any big purchase at this stage. Likewise, you should also not transfer funds or assets to your friends or family members, such as in order to pay them back. All such activates (even though you think are right) may be considered by court as fraudulent activities.

11. Complete The Mandatory Credit Counseling

As per the laws, it is mandatory for you to complete a one-hour credit counseling with a licensed counselor within 6 months after filing your petition. Your lawyer will definitely guide you through this process, but if you already know the process, it will make things quite easier for you. The counseling session usually cost somewhere around $50, but this fee must be waived off if you are not in a financial position to afford the same. After completing the session, the counselor will provide you a certificate that is a proof that you have completed the mandatory credit counseling as required by the. Based on his/her review of your finances, the counselor will also recommend in the certificate whether chapter 7 or chapter 13 is suitable for you.

Last, but not the least, filing for bankruptcy may provide you relief from most of your debt problems, but if you look at the entire picture thoroughly, it is going to be very expensive for you. The consequences of getting bankrupt can be very hard to deal with. So, if you have no , you must start saving money for the difficult days now. Implementing some aggressive saving strategies now and sticking to it will make yourmuch easier.

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