How to Avoid Going to Court when Filing for Bankruptcy
Wait several months before you file., Leave your assets where they are., Choose payments wisely., Resist adding to your debt., Get your records in order.
Step-by-Step Guide
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Step 1: Wait several months before you file.
Ideally, wait at least three to four months after you decide you want to file for bankruptcy to actually file.
You can control your financial behavior and avoid questionable transactions that might cause problems with your bankruptcy case.In some situations, such as if you're trying to prevent an imminent wage garnishment, you may not have this luxury.
If you're getting behind on your bills and experiencing significant financial stress, speak to a financial professional or credit counselor as soon as possible.
They can help you decide if bankruptcy is for you.
This way, you can plan accordingly, rather than getting yourself in a situation where you can't spend several months preparing to file.
When you file for bankruptcy, the trustee – an officer of the court who oversees your bankruptcy – will look back over your expenditures for several months before you filed.
The best way to avoid having any questionable transactions that happen a few months before you file is to make the decision to file for bankruptcy and then wait several months before you actually file. -
Step 2: Leave your assets where they are.
Any transactions in the months immediately preceding your bankruptcy filing will be highly scrutinized by the court.
Transferring assets to a friend or family member, or moving large sums of money from one account to another, looks suspect.For example, if you're filing Chapter 7, you typically can exempt one vehicle from liquidation in bankruptcy.
If you own two cars, it may be tempting to transfer the title of that second car to the name of a friend or family member.
That way you could avoid losing that car when you file for bankruptcy.
However, this defeats the purpose of bankruptcy, which is to pay as many of your creditors as possible and give you a second start by discharging all of your other debts.
The trustee and the court will look back for many months, if not years, to ensure you haven't been transferring assets in anticipation of filing for bankruptcy.
If the trustee suspects various transfers are intended to defraud, you'll wind up in court to defend or explain those transactions. , You may want to pay off certain debts once you've decided to file for bankruptcy, but preferential transfers are a big no-no.
While paying your regular bills is fine, you may end up having to go to court to explain or defend any extraordinary payments.If you want to avoid going to court, you also must avoid paying off some debts and ignoring others.
While you may think you're simply doing that creditor a favor because they're been nice to you, the bankruptcy court looks at this as fraud.
This also means you can't pay off loans made by friends or family members, despite your relationship.
These are considered legal debts and the bankruptcy court considers preferential treatment to be fraud.
After you file, you can choose to pay back debts – such as a loan from a friend or family member – even after it's been discharged.
If you plan to do this, let the creditor know.
You also typically can choose to leave out secured debts (such as your mortgage or car loan) so that you don't lose your house or car as a result of your bankruptcy. , In the months leading up to a bankruptcy, be extremely conservative with your spending and do everything you can to avoid racking up more debt.
The same concept applies to seeking credit-line increases or opening new accounts.For example, suppose you're planning to file for bankruptcy next month, and you get a credit card pre-approval in the mail.
It may be tempting to treat this offer like free money.
If the credit card company approves you with a $10,000 limit, you think you could simply max out this card and then add it to your bankruptcy.
Not so fast – if you open a new account just before you file for bankruptcy, the bankruptcy court may consider this fraud.
The same logic applies if you get a credit-line increase on an existing card and then run up the balance. , If you file a sloppy petition that you have to amend several times, you could find yourself in court having to answer questions about the quality of your paperwork.
Worse, significant mistakes could result in your case getting dismissed in its entirety.When you speak with an attorney, he or she typically will have a checklist of documents you must have to complete the bankruptcy petition.
Make sure you get copies of your credit report from each of the three major bureaus and check each entry on your report carefully.
It's important to include every debt on your petition, even if you haven't heard from the creditor in several years.
Incomplete petitions and schedules are a sure-fire way to end up in court. -
Step 3: Choose payments wisely.
-
Step 4: Resist adding to your debt.
-
Step 5: Get your records in order.
Detailed Guide
Ideally, wait at least three to four months after you decide you want to file for bankruptcy to actually file.
You can control your financial behavior and avoid questionable transactions that might cause problems with your bankruptcy case.In some situations, such as if you're trying to prevent an imminent wage garnishment, you may not have this luxury.
If you're getting behind on your bills and experiencing significant financial stress, speak to a financial professional or credit counselor as soon as possible.
They can help you decide if bankruptcy is for you.
This way, you can plan accordingly, rather than getting yourself in a situation where you can't spend several months preparing to file.
When you file for bankruptcy, the trustee – an officer of the court who oversees your bankruptcy – will look back over your expenditures for several months before you filed.
The best way to avoid having any questionable transactions that happen a few months before you file is to make the decision to file for bankruptcy and then wait several months before you actually file.
Any transactions in the months immediately preceding your bankruptcy filing will be highly scrutinized by the court.
Transferring assets to a friend or family member, or moving large sums of money from one account to another, looks suspect.For example, if you're filing Chapter 7, you typically can exempt one vehicle from liquidation in bankruptcy.
If you own two cars, it may be tempting to transfer the title of that second car to the name of a friend or family member.
That way you could avoid losing that car when you file for bankruptcy.
However, this defeats the purpose of bankruptcy, which is to pay as many of your creditors as possible and give you a second start by discharging all of your other debts.
The trustee and the court will look back for many months, if not years, to ensure you haven't been transferring assets in anticipation of filing for bankruptcy.
If the trustee suspects various transfers are intended to defraud, you'll wind up in court to defend or explain those transactions. , You may want to pay off certain debts once you've decided to file for bankruptcy, but preferential transfers are a big no-no.
While paying your regular bills is fine, you may end up having to go to court to explain or defend any extraordinary payments.If you want to avoid going to court, you also must avoid paying off some debts and ignoring others.
While you may think you're simply doing that creditor a favor because they're been nice to you, the bankruptcy court looks at this as fraud.
This also means you can't pay off loans made by friends or family members, despite your relationship.
These are considered legal debts and the bankruptcy court considers preferential treatment to be fraud.
After you file, you can choose to pay back debts – such as a loan from a friend or family member – even after it's been discharged.
If you plan to do this, let the creditor know.
You also typically can choose to leave out secured debts (such as your mortgage or car loan) so that you don't lose your house or car as a result of your bankruptcy. , In the months leading up to a bankruptcy, be extremely conservative with your spending and do everything you can to avoid racking up more debt.
The same concept applies to seeking credit-line increases or opening new accounts.For example, suppose you're planning to file for bankruptcy next month, and you get a credit card pre-approval in the mail.
It may be tempting to treat this offer like free money.
If the credit card company approves you with a $10,000 limit, you think you could simply max out this card and then add it to your bankruptcy.
Not so fast – if you open a new account just before you file for bankruptcy, the bankruptcy court may consider this fraud.
The same logic applies if you get a credit-line increase on an existing card and then run up the balance. , If you file a sloppy petition that you have to amend several times, you could find yourself in court having to answer questions about the quality of your paperwork.
Worse, significant mistakes could result in your case getting dismissed in its entirety.When you speak with an attorney, he or she typically will have a checklist of documents you must have to complete the bankruptcy petition.
Make sure you get copies of your credit report from each of the three major bureaus and check each entry on your report carefully.
It's important to include every debt on your petition, even if you haven't heard from the creditor in several years.
Incomplete petitions and schedules are a sure-fire way to end up in court.
About the Author
Denise Gomez
Creates helpful guides on pet care to inspire and educate readers.
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