Are you considering filing for bankruptcy? At Odunlami Law, we understand that this is a difficult decision to make, made more difficult by how hard it can be to understand bankruptcy code and regulations.
Most personal bankruptcies are filed either as a Chapter 7 or as a Chapter 13. Chapter 7 is essentially a liquidation of your debts. This type of bankruptcy discharges most unsecured debts, that is debts without a collateral. Unsecured debts include medical debts, credit card debts and some personal loans. However, debts such as alimony, child supports, student loans, some tax debts are generally not eligible for discharge. If you have non-exempt assets, the trustee may sell the assets and distribute the proceeds to creditors according to the priority established in the bankruptcy code.
Chapter 13 bankruptcy is a reorganization plan which protects the debtor from collection activities during the pendency of the plan. Chapter 13 allows the debtor to keep their assets, prevent foreclosures and repossessions while catching up on their financial obligations. Certain debts which are not dischargeable in a Chapter 7 can be discharged in a Chapter 13. The Chapter 13 payment plan can pay only a fraction of the debt and discharge the balance. However, debts considered to be priority debts must be paid in full as part of the payment plan.
We understand that bankruptcy is a complicated process; the following is a list of some behaviors to avoid prior to filing for bankruptcy in order to make the process as smooth as possible.
Don’t wait till the last minute
The bankruptcy code affords debtors protections that can prevent a loss of assets. Waiting until the last minute to file bankruptcy could prejudice this. Many debtors have lost their homes or cars because they waited too long to contact a bankruptcy attorney. If there is a wage garnishment against you, the sooner you file, the better you are in a position to protect a loss of income from the garnishment. It is also a good idea to file before a creditor obtains a judgment and attaches a lien to your property.
Don’t live extravagantly
Don’t take out any new loans, create new debt or make extravagant charges on your credit card shortly before filing bankruptcy. The bankruptcy laws give creditors protective rights where a new debt has been incurred just prior to filing bankruptcy. As a rule, you should stop using your credit cards unless it is for absolute necessities such as food, clothing and utilities.
Don’t transfer property to someone else
Don’t sell or give away any substantial assets such as real estate, a vehicle, stocks or bonds or ownership of valuable personal property. The bankruptcy exemptions can protect some or all of your assets. However, if you transfer your property into someone else’s name, we are no longer able to protect your assets in the way we could if they remained in your name. A bankruptcy fraud investigation is also more likely if the bankruptcy courts are aware of the transferred property. In the same token, do not file bankruptcy when you are about to receive substantial assets.
Don’t use your retirement account to pay off your debt
Don’t borrow from your retirement account to pay off your debts without first talking to a bankruptcy attorney. Most retirement accounts are protected by either federal or state exemptions. Therefore, taking money out of your retirement fund takes it out of that protection and turns into something that cannot be protected in bankruptcy. Furthermore, using your retirement money that is easily protected to pay off debts that can easily be written off in bankruptcy is not a good way to get your fresh financial start.
Don’t pay off or pay down your debts before filing
Don’t pay off or pay down your debts even the small ones. The only debts that should be paid are secured debts which you intend on retaining during and after bankruptcy such as your car and/or your home. You are required to list every creditor. You cannot selectively decide which creditors to list on your bankruptcy schedule.
Don’t bank where you owe money
Don’t bank with entities that you owe money. For instance, if you have a checking or savings account with a bank or credit union with whom you owe a debt such as a credit card, mortgage, car loans or personal loans, that bank has a right to withdraw the money from your bank accounts and apply it to the debt owed. You should consider opening a new account at a bank or credit union that is not one of your creditors.
Don’t lie to your attorney
Don’t withhold information from your attorney. In order to get the best legal solution with regards to filing bankruptcy, your lawyer must have an accurate picture of your financial situation. Withholding information from your attorney could create unnecessary complications and could even lead to charges of bankruptcy fraud.
At Odunlami Law, we understand that the bankruptcy process is incredibly complicated and overwhelming. We are here to make this process as easy as possible. Reach out to us online. Call the Bankruptcy Attorney at Odunlami Law: (973) 993-1900.