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What are the Steps to Claiming Bankruptcy?

What are the Steps to Claiming Bankruptcy?

Steps You Must Take to Prepare for Bankruptcy

If your debts have become unmanageable and you are being threatened with lawsuits or in danger of losing your home, and being bombarded by creditors calling night and day, then you may be claiming bankruptcy.

To properly prepare for filing bankruptcy, there are some things you can do to make the process smoother and to avoid any complications.

  • Stop making payments to any credit card companies. It is a waste of money and the bankruptcy trustee may recover those amounts anyway if made within 90 days before you file.
  • Do not transfer any property with any significant value, usually around $1000 or more, to a family member or friend. This is a voidable transfer if made within 90 days of filing and can be cancelled by the trustee as it is deemed to be unfair to creditors.
  • Do not pay back any loans to friends and family while ignoring other creditors. The trustee can look back up to a certain time to see what loan payments have been made and to whom and recover those payments. You can always pay them back once you receive a discharge notice from the court.
  • Do not ignore any pending lawsuits even though your filing places an automatic stay on all legal proceedings. If the creditor gets a judgment and places a lien on your property or you fail to appear in court, it will take more time and attorney’s fees to remove the lien and you may have to pay court fines.
  • Do not keep using your credit cards or take any cash advances on them. This could be considered fraud since you had no intention of making any payments to the credit card companies or paying back the advances. As a result, you may not be able to discharge this debt.
  • If you own real estate other than your home or large items like boats, consult with a bankruptcy attorney. These items are not protected in a Chapter 7 bankruptcy filing and you may have to consider a Chapter 13. In some instances, you may be able to convert nonexempt property to exempt property.
  • Be prepared to list all your assets. Should you forget to list real estate that is not your residence or other nonexempt property, you could be committing fraud. In some cases, you could be charged with a federal crime, face imprisonment, and have your bankruptcy dismissed.
  • A Chapter 7 will not save your home from foreclosure, but a Chapter 13 might. You need to consult with a bankruptcy attorney before your home goes into foreclosure to consider your options.

Claiming bankruptcy is a major financial decision. You need to make the right choices and take the proper measures before filing. Consulting with a bankruptcy attorney should be a priority when filing becomes a real possibility.

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