Filing bankruptcy is not something people want to do, rather something they have to do for various different reasons. When a person or married couple makes the decision to file for bankruptcy there are a few guidelines they should follow to make the bankruptcy procedure as easy and quick as possible.
1. Consult with an attorney who specializes in Bankruptcy Law.
It is important to consult with counsel who practices bankruptcy law on a daily basis and is able to advise you on whether bankruptcy is the best option for you and if so, what chapter of the bankruptcy code is best for your situation.
2. Stop incurring debt.
If you are contermplating filing for bankruptcy, stop incurring new debt. The goal of bankruptcy is to get out of debt and achieve a fresh new financial start. If one incurs new credit card debt, personal loans, or payday loans on the heels of a bankruptcy filing, that may prompt an objection from a creditor and lead to the petitioner still due an owing the recently incurred debt even post bankruptcy.
3. Don’t sell or transfer any assets.
Transferring ownership of property to pay a debt owed or concealing an asset may prompt the trustee in bankruptcy to recoup the property as a preference payment and/or deny discharge.
4. Don’t take money out of retirement plans.
Almost always retirement funds are exempt from a bankruptcy estate and their value is deemed to be “exempt.” If money is withdrawn from a qualified retirement account it loses its exempt status and may no longer be protected by bankruptcy.
5. Tax Refund.
Tax refunds are usually exempt from the bankruptcy estate. In Bankruptcy proceedings the tax returns are listed on Schedule “B” of your petition and are exempted on Schedule “C” assuming there is sufficient personal property exemption remaining. Tax returns are viewed as deferred income or as an account receivable (depending on what chapter of bankruptcy one is filing).
6. Don’t add your name to someone else’s account.
The general rule is if your name is on an asset it is yours. If one adds their name to a parent or child’s account to help them with finances or just in case, although their intentions may be good, they have a percentage ownership in that account. If the account does not have a significant balance it usually can be exempt, however, if the balance is larger it may be viewed as a non-exempt asset.
This list is far from exhaustive and represents a small sample of issues that arise in pre-bankruptcy planning. If you are considering filing for bankruptcy I urge you to call my office and make an appointment to meet with a Bankruptcy Lawyer regarding your issue.
If there are any general questions or topics you would like information about relating to bankruptcy law in the Eastern Pennsylvania region, you may contact the Bankruptcy Lawyers at Sadek Law Offices, LLC at 215-545-0008 or email brad@sadek-cooper-site. Thank you.