Are you looking forward to Filing Bankruptcy? Then you must hold some basic understanding of the whole process.
Filing bankruptcy is as complex as it sounds and a minor mistake while filing can become a roadblock to the discharge process.
As a result, you will have to reapply and go through the whole waiting phase all over again. The major issue behind disqualification is traced to a simple mistake made by applicants, especially due to the lack of proper insight.
Today, we are going to learn some essential tips, which will help you avoid making any mistake while filing your bankruptcy.
Here are the top 10 Do’s and Don’ts you must know before filing a bankruptcy.
1. Talk to a Bankruptcy Attorney
Just because you are out of financial resources, that doesn’t necessarily make it mandatory for you to file a bankruptcy.
Scheduling a session with an attorney will enable you to understand your financial health and choices.
A Bankruptcy attorney will analyze your financial health and help you figure out if filing a bankruptcy is a viable solution.
You will have the option to file under Chapter 7, 11 or 13. As each option carries different features, a bankruptcy attorney helps you selecting the right Chapter that suits well with your situation.
2. Don’t Skip any Income
In the Bankruptcy process, the court will analyze at least six months of your household income and you also have to submit a picture of your household.
Therefore, mention all your income while filing for bankruptcy. The court considers all cash inflow as income, whether it’s coming from your second job or from your spouse.
However, your spouse is not obligated to pay your debts. In order to list your spouse as your dependent in your bankruptcy, you are required to include their income.
3. Mention all your Assets in Petition
It’s crucial for you to include all your assets’ details while filing bankruptcy. You are required to mention all assets like furniture, bank account, vehicle, etc. regardless of their date of ownership.
To avoid any legal errors, make sure you reveal all your assets to your attorney. If you hide your assets, then the court may deny a discharge of your bankruptcy and book you under criminal prosecution.
4. Don’t sell or transfer your assets
Before filing bankruptcy, make sure you don’t do anything to hide your assets from your credits or the court.
You should stay away from transferring title or ownership of your properties to others. In your meeting with the creditors, the trustee will ask you question related to sell or transfer of assets.
Remember, according to law, a trustee possesses the power to undo any kind of transactions you have made between a certain timeframe.
5. Always keep receipts of your deposits and withdrawals
When reviewing your bank statement, the trustee will inquire about all your deposits and withdrawals, especially if it involves a large sum of money.
It’s imperative that you remember all the dates of your deposits and withdrawal, along with the reason behind it.
It’s always better to keep a receipt with your every purchase, withdrawals, and deposits.
6. Don’t lay hands on your retirement accounts
Most states law protects your retirement accounts from creditors but if you withdraw them before filing a bankruptcy, then you will lose all protections on these accounts.
Withdrawing from tax retirement funds can lead to penalties and taxes. Furthermore, when you file bankruptcy, your taxes and penalties will not be discharged by the court, which only leads to more burden on your financials.
7. File your Taxes
When filing a bankruptcy, the court will ask you to submit most recent tax filings. Therefore, it's crucial for you to file your taxes before filing for bankruptcy.
In Chapter 7, the court will keep your case open unless or until you submit your proof for tax returns and tax refunds.
Under Chapter 13, it is mandatory for you to show your last four years of return.
8. Don’t Purchase anything prior to filing a bankruptcy
Do you know your creditors can object to all your charges within three months of you filing bankruptcy? When you file a bankruptcy, all your creditors are notified.
So, if your creditors find that you make some purchases days before filing the bankruptcy, then they can file a separate lawsuit against you.
As a result, you will not be able to discharge that part of your debts.
9. Create a Separate Account
A bankruptcy attorney can save some of your money received through social security, personal injury settlement, etc. provided you information about to your attorney and inform where the source of that money.
So, it’s better for you to create a separate account as similar to the nature of your money source.
For example, you can create a social security account where you can only deposit money from one fund but not from other funds.
Your attorney will have more chance in protecting the money during a bankruptcy.
10. Don’t file if your medical conditions are not stable
Your insurance doesn’t cover all kind of treatment and if you face any health complications, you may end up paying a hefty sum of money.
So, if medical debt is the reason behind filing for bankruptcy, then it’s better to wait to a complete recovery.
Once you file a bankruptcy and faces medical complications for the second time, then you are looking at major financial trouble.
If you are new to bankruptcy, then it’s crucial to approach a certified Bankruptcy Attorney to guide you throughout the process. Bankruptcy is a complex procedure and an attorney will make the process much smoother.
Hopefully this article explained enough for you to understand some essential tips on filing a bankruptcy. If you have any other questions please contact us for a free consultation.