WHAT TO KNOW ABOUT PREPARING FOR BANKRUPTCY
Filing for bankruptcy is never an easy decision, but it may be the best way for you to put your finances back on track. As with any other major decision, bankruptcy requires careful thought, planning, and preparation. You don’t want to file too early. For example, if you are drowning in medical bills due to an injury, it may be best to wait until you have completed treatment and know what future expenses you may incur. You also do not want to wait too long, allowing creditors to pursue court judgments against you, often for the debt plus interest and even attorney fees.
Timing is an important part of preparing to file for bankruptcy. An experienced and knowledgeable bankruptcy law firm can help you prepare to take this step toward a better future without taking any missteps that can make things worse in your life.
At Garcia & Gonzales, P.C., we help clients in Westminster, Denver, Aurora, Boulder, and Northglenn, Colorado, as they prepare for a fresh financial start through bankruptcy. Solid preparation is the key to success.
What to Do to Prepare for Bankruptcy
Make sure you have filed the required tax returns. Only under limited circumstances can your income tax arrears and penalties be discharged in bankruptcy. Any refunds due based on the income you earned prior to the bankruptcy goes back into the estate, not to you. If you haven’t filed your taxes in the two years prior to filing for bankruptcy, it can affect your case.
Continue to pay your bills. Domestic payments, such as child support and alimony, are not dischargeable in bankruptcy, so you should continue paying them. You will also need to continue paying insurance premiums on your home and vehicles, especially if your lender requires them. If you want to keep your home and car, you will not be able to discharge those debts in bankruptcy because the debts are secured. You should also continue paying utility bills, although some past-due bills may later be dischargeable.
Stop automatic payments. Many people have payments for certain bills automatically deducted from their bank accounts for the sake of convenience. In preparation for your bankruptcy filing, you should halt automatic payments and take control of what you pay and what you don’t in anticipation of discharging your debt through bankruptcy. You should consult with a bankruptcy attorney to learn more about this.
Document debt information honestly and thoroughly. Under penalty of perjury, you must disclose all assets, debt, income, expenses, and financial history when filing for bankruptcy. If you fail to disclose a debt, even accidentally, that debt will not be discharged through bankruptcy and you will continue to owe it. Take your time when compiling this information to make sure you don’t miss anything.
What Not to Do Prior to Filing
Don’t wait until a creditor has won a judgment. When a creditor obtains a judgment against you, it may allow them to garnish your wages or place liens on your home, vehicles, or other assets to secure repayment for the judgment. Garnishments and liens usually cannot be discharged in bankruptcy, so it’s vital that you file before a creditor takes you to court.
Don’t use retirement accounts to pay off debt. In most cases, you can protect your retirement accounts during bankruptcy, so don’t cash it in to pay off your debt before filing.
Don’t acquire new debt. In the 70-90 days prior to filing for bankruptcy, avoid activities like maxing out credit cards or making major purchases. Not only will these be viewed as “bad faith” expenditures, but you could also be charged with fraud and be unable to discharge that debt.
Don’t move assets. Attempts to move or transfer assets to “hide” them from your bankruptcy case may result in criminal penalties. If you sell an asset to pay your rent or utilities or to buy groceries, that may not affect your bankruptcy filing, but you will need to carefully document those transactions.
Don’t selectively pay off some loans. If you owe a family member or friend money for that loan they gave you, paying them in full before paying your other creditors may be deemed a “preferential transfer.” That repayment can be undone in bankruptcy which means the court can force your friend or family to return the payment and redirect that amount to your creditors.
Turn to Garcia & Gonzales, P.C for Help
It is easy to see how important detailed preparation can be to filing for bankruptcy. One misstep, even an accidental one or an oversight, can derail your opportunity to get a fresh financial start. That is precisely why you need to work with experienced bankruptcy attorneys.
Skilled attorneys can help you fully assess your financial situation and give you advice to determine the best course of action, including what bills you should continue paying, what type of bankruptcy you should file, and how you can better manage your finances in the future. Attorneys can help you complete and file all of the necessary forms and paperwork and appear with you in court. There is no need to handle bankruptcy alone, and the risks of doing so could be damaging instead of productive.
At Garcia & Gonzales, P.C., we have helped thousands of clients in Westminster, Colorado and surrounding cities and towns prepare for and navigate their way through the bankruptcy process.
Call our office now to schedule a consultation that may be your first step on the road to a better future.