If you face unmanageable debt and are considering filing for bankruptcy protection, there are specific steps that you want to take, as well as certain things you don’t want to do, before you actually file. Taking the right steps can streamline the process and help ensure that you get the relief you want from the bankruptcy process. Certain actions, though, are prohibited and can jeopardize your eligibility for protection.
Actions to Take Before Filing for Bankruptcy Protection
To maximize the benefit of a bankruptcy filing, you want to:
- Gather all potentially relevant documents—Pull together all financial information, such as bill statements, bank account information, wage statements and information on all assets you own
- Look at your alternatives—Bankruptcy should be your last option. Talk to creditors to see if you can restructure payments or negotiate a new loan. See if your mortgage lender will allow a short sale of your property.
- Learn about the advantages and disadvantages of a bankruptcy filing—In order to understand whether it’s the best option for you, you want to know all the benefits, as well as the consequences.
- Start developing good financial habits—Set a budget and stick to it. Try to pay something to every creditor each month, even if it’s not the full amount.
Things You Don’t Want to Do Before a Bankruptcy Filing
It can be tempting to take certain actions before filing for bankruptcy, but here are specific things you should not do:
- Do not make any significant purchases—Don’t go and buy a new stereo, jewelry, a boat or any other big ticket item. This may be considered bankruptcy fraud if it can be shown that you intended to file for bankruptcy when you bought the item.
- Don’t take cash advances on credit cards —Again, if it can be shown that you intended to discharge the credit card debt in bankruptcy when you took the advance, you can face fraud charges.
- Don’t transfer assets to another person—If the bankruptcy court determines that you have transferred property to avoid having it as part of the bankruptcy estate, you may be disqualified from filing for bankruptcy, or could even be charged with bankruptcy fraud.
- Don’t pay off a debt to a family member or any other favorite creditor—Under the bankruptcy laws, you cannot choose to pay off a favorite creditor to the exclusion of your other creditors. The court will likely make the creditor return the funds to the bankruptcy estate.
Contact John Hargrave & Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.