Preparing for a Successful Bankruptcy Starts Before You File

Submitted by Jen Jones on Sat, 06/06/2009 - 8:16am

Preparing for a Successful Bankruptcy Starts Before You File

Filing bankruptcy is obviously a significant decision, and your case must be handled with care throughout the filing process. But your actions before you file bankruptcy are also important to ensuring you maximize the benefits bankruptcy has to offer. Here are some things to keep in mind in the run-up to your filing:

Don't wipe out your retirement savings. You might think you should liquidate your retirement accounts or pension plans to pay down your debts. But these savings are your nest egg for the future. Most (if not all) of your unmanageable debts will be discharged in your bankruptcy. So hang on to your nest egg. In all likelihood, bankruptcy will allow you to keep it and wipe out the bulk of the debt that's dragging you down.

Don't borrow against your home. Chances are, if you're thinking about borrowing against your home, it's because you're already significantly in debt. Stop the debt cycle today and save your home equity by filing for bankruptcy now.

Don't run up your credit cards or take out loans you can't repay. You may think you should rush out and use as much credit as you can before filing your case. Be careful. Large credit card purchases or loans shortly before filing could be considered fraudulent. If that happens, you won't be allowed to discharge the debt. Don't feel the need to use credit just because you have it. You will be able to get credit again. Bankruptcy gives you the fresh start you need to reestablish a track record of paying your bills on time -“ and that's what opens the door to new credit in the future.

Don't try to hide your property. You may also be thinking about giving some of your cash or property to friends or family members to avoid losing it through bankruptcy. Be careful here too. The bankruptcy court has the power to reverse transfers that appear to have been made with a fraudulent purpose. If the property can't be recovered directly, you may have to pay it back yourself to get your case confirmed. You could also get hit with sanctions for transferring property to keep it out of your case. Instead, consult with your attorney. You might be surprised: there are many ways to protect your property -“ and chances are, the property is probably fully protected under your state's exemptions laws anyway.

Don't hide the facts from your attorney. Always be open and completely honest with your attorney about your financial situation. Your attorney needs to understand the entire picture to maximize the benefits bankruptcy has to offer you. While you might think you don't need to disclose something, it could be important, and failure to disclose pertinent information related to your assets and liabilities could lead to fines, sanctions, or even dismissal of your case. Your attorney is bound to keep all of your communications confidential. So, be honest; you've got nothing to lose and everything to gain.

Keep these things in mind as you prepare to file bankruptcy. You'll empower both yourself and your attorney to get the best result bankruptcy has to offer you.

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