The same difficulties resurface over and over again after meeting with hundreds of potential clients during our free consultations. The top 10 most prevalent concerns that should be addressed or followed before to filing a chapter 7 or chapter 13 bankruptcy case are listed below.
10. Consult With An Experienced Bankruptcy Attorney Right Away
Even if you are not ready to declare bankruptcy, meeting with an experienced bankruptcy attorney will provide you with the necessary knowledge to make informed decisions. Ask the attorney how many other areas of law they practise, how long they have practised bankruptcy law, how many bankruptcy cases they have filed, and to name the trustees in the jurisdiction and what document requirements each trustee requires to determine if you are speaking with an experienced bankruptcy attorney. Attorneys who do not know who the trustees are or what each of them demands do not file bankruptcy cases on a frequent basis. Meeting with potential clients after it is too late is one of the most typical issues we encounter. If you’ve been issued with a summons and complaint, you should contact a bankruptcy lawyer right away. If you owe taxes and the IRS or FTB has threatened to garnish your pay, you should see a bankruptcy attorney.
9. Take a look at your monthly expenses.
Schedule J is included in every consumer bankruptcy filing. Schedule J is an estimate of your household’s typical or predicted monthly costs at the time your bankruptcy case is filed. Take a few minutes to check your bank account records before booking a free consultation with an expert bankruptcy attorney to have a clearer picture of where your money is going each month. This can assist creditors figure out whether you have any accessible discretionary income.
8. Double-check that all of your tax returns have been filed.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 established new criteria for tax returns and bankruptcy filing. If you apply for bankruptcy, you must give your tax return from the prior year, or if required, the current year. The IRS might seek that your bankruptcy case be dismissed if you fail to file a return that becomes due after you file for bankruptcy. Filers of chapter 13 bankruptcy cases must have submitted all of their tax returns for the preceding four years before filing the bankruptcy petition, according to Section 1308 of the Bankruptcy Code.
This is one of the regular questions posed by the chapter 13 trustee during the creditors’ meeting.
7. Examine and keep track of self-employment or 1099 income.
If you are self-employed or get 1099 income, knowing your income and spending for each of the six months leading up to filing for bankruptcy is critical. The Means Test, like Number 6 below, analyses a six-month average of your income to assess if you have monthly discretionary money accessible to creditors. When self-employed or getting 1099 income, determining your take-home pay is always more time intensive, but it is essential important before filing bankruptcy.
6. Each month, save your pay stub or proof of income.
The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was approved by Congress in 2005, altering the bankruptcy rules and introducing the Means Test. The Means Test is based on local and national spending criteria. The Means Test also extrapolates your gross income over a twelve-month period based on a six-month average. You’ll need all six months’ worth of pay stubs or other forms of evidence of income.
5. Never take a credit card cash advance.
Taking a cash advance at the time of bankruptcy filing might be quite problematic. For the same reasons as Number 4 described below, this can be an issue. It depends on the circumstances, but if you obtain a $5,000 cash advance on a credit card three weeks before filing bankruptcy, the credit card company will almost certainly contact you when you file. It’s possible that an adversary will accuse you of fraud.
4. Don’t Keep Using Your Credit Cards
The usage of credit at the time of filing for bankruptcy is one of the most prevalent issues in a consumer bankruptcy. The issue is that recent credit utilisation is only circumstantial proof that the user never intended to repay the amount. How can you get into greater debt if you can’t pay your expenses when they’re due? Do not use your credit cards if you are unable to make payments to your creditors. Stop accruing additional debt if you are having difficulties paying your credit cards and are skipping payments on a regular basis.
3. Don’t provide money or assets to family members or friends.
It is not permitted to simply transfer an automobile to a friend or family member before to filing bankruptcy in order to lower your assets. It is required to be revealed and will simply add to the complexity of your bankruptcy case. The primary purpose of filing bankruptcy is to properly discharge all of your qualified debts. Transferring assets to hide assets would only complicate your bankruptcy case and may result in the loss of your entitlement to a discharge.
2. Do not take out a loan or make an early withdrawal from a 401(k) plan.
Exemptions in bankruptcy safeguard assets such as retirement money. We deal with customer after client who has unintentionally borrowed or taken all of their retirement funds in an attempt to pay off bills or stay afloat. Before you decide to take money out of your retirement account or borrow against it, you must consider all of the pros and cons. Bankruptcy affords exclusions that can safeguard a person’s whole retirement portfolio. You can still keep your retirement if you declare bankruptcy.
Finally, and most importantly:
1. Make a complete disclosure of your income, expenses, and assets.
In order to qualify for bankruptcy protection, a person must reveal all of their income, spending, and assets in their petition. The automatic stay is the backbone of bankruptcy, but the body treats creditors differently depending on the kind of debt owing and the priority of payment of obligations required by the bankruptcy legislation. It is impossible to treat all parties equitably without complete disclosure. It is not the responsibility of the bankruptcy court or the trustee appointed to your case to locate assets. In exchange for the discharge of their obligations, the bankruptcy filer must be open and honest about their income, spending, and assets. If you have not properly reported everything, you risk losing your entitlement to a debt discharge, as well as facing criminal accusations and fines.