Debtors planning to file for bankruptcy are advised to take certain prebankruptcy planning steps to help them properly and successfully file for bankruptcy. In this article, we define the term “prebankruptcy planning” and offer some suggestions for it.
There are a few things that a person can do as part of prebankruptcy planning including:
Below are some tips for debtors in the pre-bankruptcy planning phase.
In almost all cases, bankruptcy debtors will be represented by an attorney who can help them handle bankruptcy laws, processes, and hearings. It’s strongly encouraged for every debtor to have qualified legal representation. Lawyers can help you understand whether or not filing for bankruptcy is your best option, determine which type of bankruptcy is right for you, and help you navigate the entire bankruptcy process from beginning to end.
When you file for bankruptcy, you must turn your non-exempt property over to a bankruptcy estate to be sold off to pay your creditors. Many debtors find it tempting to give property away to family or friends in order to keep it out of their bankruptcy estate. This is considered to be fraudulent and can lead to you having your case dismissed and facing criminal charges. For this reason, it’s important to be totally honest in the bankruptcy process.
The purpose of bankruptcy is to provide debtors relief by discharging most of their debts. If you forget to list one of your creditors, the debt you owe them may not be discharged, making it important to list all creditors without exception.
All of the purchases that you make within the six months prior to filing bankruptcy will be carefully scrutinized by your bankruptcy trustee, who is checking to make sure that you didn’t make any purchases while you were already insolvent without any intention of ever paying back your debt.
Debtors cannot choose to pay certain creditors while not paying others, especially if that creditor is in some way related to you or benefits from your preferential payments. If you are found to have made a preferential payment, you may have to return that money to your bankruptcy estate.
Certain types of property required for living daily life such as clothing and home furnishing are considered exempt and will not be seized and sold off when you file for bankruptcy. It’s important to go over everything you own with your lawyer to see what you can claim as exempt and keep for yourself even as you file for bankruptcy.