Bankruptcy can be a challenging but essential step in your financial recovery. While it can ruin your credit, it also allows you to start over debt-free. Set yourself up for success throughout the complicated process by keeping in mind the possible prep listed below before you formally file.
Before You File for Bankruptcy
1. Pay Necessary Bills
While you can protect your property with bankruptcy exemptions, most states don’t have a bank account exemption, and once you file for bankruptcy, your accounts will be frozen. An unexpected course of action can be to use the funds that you have to pay off necessary bills before you file to avoid this problem. It will keep your bank account balance low for exemption purposes and will help you prevent set-offs from entities like your utility company.
Paying overdue utility bills is particularly important not only to keep your power on but also because the company can use a security deposit you invested in previously to pay off prior overdue bills. When this security deposit depreciates, you are required to restore it to keep your services.
2. Don’t Get Rid of Your Assets
If you have retirement savings, talk to a bankruptcy attorney about how to handle these assets. You can usually protect most retirement funds in bankruptcy, and you’ll likely find yourself better off filing before depleting this money to pay off your debts.
It is also unwise to move or sell your assets before filing for bankruptcy because it looks like you’re hiding your assets, which can result in denied discharge and possible criminal penalties. If you sell a property to pay off debt with the profits, that does not necessarily apply, but you should be prepared to explain all transactions to justify the relinquished asset.
3. Notify Creditors of the Bankruptcy
This measure will expedite the enforcement of a bankruptcy automatic stay, which immediately stops creditors, collection agencies, or government entities from bothering you with lawsuits and actions against your finances. It requires that you fax or email a letter outlining your bankruptcy case number, filing date, and court where it was filed to stop financial matters that would be very difficult to undo, such as:
- Wage garnishment, which is money your employer takes out of your paycheck to pay directly to your creditor for debts. This mandate is issued by a court.
- Imminent foreclosure of your property.
- Vehicle repossession, which will make the car loan process very difficult in the future.
A bankruptcy attorney can do this on your behalf if you choose to hire one.
4. Stop Borrowing Money & Using Credit Cards
A creditor might object your discharge of any new debt acquired within 90 days of filing for bankruptcy because it looks like you had no intention of paying it back in the first place. If you take out significant cash advances for luxury items or something that is beyond necessities, you have likely committed fraud and will still have responsibility for that debt even after filing for bankruptcy.
5. Find a Bankruptcy Attorney
Bankruptcy is an emotionally draining process that requires a lot of detail to do correctly. An attorney, while they will come at a price, is an investment in your financial future. They can advise you on the best course of action through every step of the bankruptcy process, including the points listed earlier, and can step in to deal with with debt collectors and bankruptcy court trustees.
If you feel trapped under insurmountable debt, a consultation with a bankruptcy attorney can help you weigh your options. The Gil Law Firm has dedicated itself to assisting residents of Dothan, AL, with financial struggles since 2000. Rafael Gill III has the experience to help guide you through this difficult process and get your financial welfare back on track. To learn more about this firm’s full range of legal services or to book a consultation, go to their website or call (334) 673-0100 today.