21 Things to Know If You are Considering Bankruptcy.
1. Meet with a bankruptcy lawyer sooner rather than later. Waiting until you have an emergency like a lawsuit or foreclosure just complicates the case. If bankruptcy is the best option, having time to plan will reduce stress, make your case go smoother, and quite possibly save you money.
2. Keep your bills. It is tempting to begin trashing bills when you don’t have the money to pay. Having your bills in order will make preparation of your bankruptcy case much easier. You should also get a free copy of your credit report from www.annualcreditreport.com
3. Do not repay friends or family members for personal loans. It is tempting to repay those closest to you, but if a bankruptcy is in your future this is a bad idea. You risk having the trustee go after that money in order to pay it to other creditors. This is called a “preference.”
It is best to wait until after bankruptcy to repay friends and family.
4. Keep your pay stubs and keep good business records. Bankruptcy of course depends heavily on your income. Your bankruptcy lawyer will need all of your pay stubs and business records for approximately one year in order to prepare your case. It is easier to just have this information on hand if you decide to file.
5. File your tax returns. If you are owed refunds and get them before you file, you will be able to keep them. If you wait until after you file bankruptcy to do your taxes, you may lose the tax refunds. If you owe tax, it will help you qualify for bankruptcy and help you get a grasp on your financial situation.
6. Do not let parents put property in your name for estate planning purposes. Often times, parents will want to transfer property to their children in order to avoid probate. If you end up having to file bankruptcy, you risk losing that property to the bankruptcy trustee.
7. Get needed medical treatment and dental treatment if possible. It makes no sense to file a bankruptcy and then get hit with an expensive medical bill the month after your case ends.
8. Do not transfer property to friends or family members. It’s tempting to “give” your valuable property to friends in order to keep it out of your bankruptcy, but there are of course rules against this sort of thing, and that includes gifts or “fake”sales. When you work with a professional bankruptcy lawyer, there are a number of legal ways to avoid losing things of this nature. Do not run the risk of ruining your case, or going to jail, by hiding property.
9. Once you are sure you are going to need to file, stop using credit. Charges that are made close to the time of filing your case get special scrutiny and you may have to repay them in your bankruptcy case.
10. Do not choose the first bankruptcy lawyer you come across. Meet a few lawyers and ask questions. Do not choose the cheapest bankruptcy lawyer you find. Those lawyers are cheap for a reason. You are filing a document which will affect your entire financial future, choose wisely.
11. Do not beat yourself up. Many good people are forced to file bankruptcy. It is not something any of us expected to have to do, but it’s not the end of the world. Having too much debt is enormously stressful. You will not be able to help anyone or accomplish anything, if you are seriously ill or dead. Make a rational decision with the help of a professional. Accept that you’re not a bad person for considering the idea of bankruptcy.
12. Do not use retirement funds or home equity to pay credit cards. If you end up filing bankruptcy this is simply money wasted, money that you could have kept in a bankruptcy. If the situation is that drastic that a bankruptcy may be necessary, meet with a professional before deciding to use retirement funds or home equity to pay down credit cards.
13. Do not cancel your health insurance in order to save money. It’s tempting to take the chance, but access to healthcare is crucial. If you are sick or dead, you are not in a position to help anyone or accomplish anything. Don’t skimp on medical care or health insurance, it’s too important.
14. Do not turn off retirement plan contributions. You can keep qualified retirement funds in a bankruptcy, and if you end up doing a repayment program (a chapter 13) you may continue to fund your retirement during the plan. Having a history of making contributions will help establish your right to continue building that account during a Chapter 13.
15. Do not consider hiding anything from your lawyer. We are human beings, and believe me, we have seen it all before. It is our professional obligation to keep your confidences and there is almost always a way to handle something negative properly and legally, as long as we know about it before hand and it doesn’t come out in court as a “surprise.” We are not here to judge you, we are here to help you, so be honest.
16. Do not get involved with a shady “credit counselor”. There are many quality people in that industry, but you have to be careful to avoid dishonest and greedy debt and credit counselors. If you do decide to use a credit counselor, do your research with the Better Business Bureau and get references before making a choice.
17. Do not air your dirty laundry on Facebook.. It’s tempting to complain or vent on sites like Facebook, but creditors and all sorts of lawyers are increasingly doing online research on people in order to try to get an advantage in the courts. Keep your private financial information private.
18. Do not be overly concerned about your credit rating. Your lawyer will help explain that a bankruptcy is not the end of the world. A credit score is simply an industry tool used to determine how much interest creditors will likely be able to charge you over time. That’s it! It is not the measure of your self worth as an individual.
19. Do not listen to Uncle Fred. Uncle Fred isn’t a lawyer, he hasn’t been filing bankruptcies for 16 years and he did not go to law school. Same goes for Aunt Esther. Get professional help with your bankruptcy questions and ignore the “experts” you may encounter in life.
20. Don’t write bad checks and ignore lawsuits. Writing bad checks can get you into criminal trouble as well as cause more debt. Ignoring lawsuits and in particular, interrogatories (questions from creditors about your assets which the court orders you to answer) can also lead to criminal trouble.
21. In summary, you should rely on professional advice and make an honest assessment of your situation. Keep good records, file your taxes and go see a professional about the idea of filing for bankruptcy as soon as possible. It’s not the end of the world, and in fact it may open up a world of opportunity for you and your family. I enjoy helping people through this process and I can be reached at (303) 670-4242. Robert Gauss, Esq. Bankruptcy Professional. More information is available at www.gausslaw.com