A little bankruptcy planning could make a significant difference in making the process of filing your bankruptcy case less painful and overwhelming. As a struggling debtor, you might be busy treading water, trying to alter your finances, and dodging your creditors' calls, that you fail to see the practicality of filing bankruptcy. It could result in expensive mistakes. Los Angeles Bankruptcy Attorney offers credible and compassionate legal services to help our clients go through their bankruptcy process and get back on their financial feet. Read on to learn the do and don'ts of bankruptcy that we have shared.
What to Do
Discussed below are what to do before, during, and after filing bankruptcy:
Accept Your Financial Situation
Most struggling lenders decide to file bankruptcy after all other options have failed. They have lawsuits against them, bank accounts being levied, and wages garnished. While it can be a stressful and depressing moment, accepting the situation is the initial step to working with an experienced bankruptcy lawyer to resolve the issue.
Commit Yourself to Your Budget
Take the initiative and break the cycle that resulted in huge debts. If you face financial challenges, you should try maintaining monthly, weekly, and daily budgets. While it might be hard to stick to an inflexible budget initially, you'll be more successful living within your budget with more resilience and practice.
Consult with a Skilled Bankruptcy Lawyer Immediately
Most experienced bankruptcy attorneys offer free initial consultations, and you can take advantage of that. Speaking with a lawyer does not always mean you'll be bringing a bankruptcy case. It lets you know how bankruptcy applies to the circumstances. There are numerous forms of bankruptcy, and it's essential to understand how every option would apply to the case.
Moreover, you want to find a lawyer with whom you are comfortable. You can only be honest with a person if you trust them.
Be Honest with Your Seasoned Attorney
There is nothing too embarrassing to avoid sharing with the skilled bankruptcy attorney. It would help if you were honest about your financial status. That way, you avoid putting yourself in situations that might prevent you from obtaining the intended financial status. Some debtors prefer not speaking about their significant recent purchases or medical conditions, thinking that the situation could affect their bankruptcy case filing outcome. Contrary to popular belief, it would be best if you told of your circumstances because the attorney will develop strategies that could nullify the consequences on your decision's outcomes.
Moreover, the duty of confidentiality prevents lawyers from even informally discussing information related to their clients' cases with others. They must keep private all information related to your representation, even if that information didn't come from you.
It's worth noting that failing to list all your debts and assets could hinder attempts to discharge your debts.
Attend the Meeting of Creditors
Usually, twenty to forty days after submitting your bankruptcy case, you should attend 341 meetings of creditors. During the hearing, any attending lender and the trustee could ask you questions about your financial situation and bankruptcy. The bankruptcy court will mail you a notice with the time, location, and date of the hearing. If you fail to attend the meeting, the judge will dismiss your case.
Know Which Bankruptcy Exemption to Use
Understanding the bankruptcy property exemption could help you keep valuable assets and lower what you repay your lenders.
The central concept of bankruptcy law is getting you a fresh financial start. Part of the idea is that you can start over with a minimal amount of essential assets to permit you to survive and get back on your feet. So, if you bring bankruptcy, you can keep specific assets known as exempt property. What asset is exempt will hinge mainly on your domicile state and financial circumstances.
In other words, exemptions are essential because they could make the difference between losing or keeping the property in bankruptcy. As a result, be sure to thoroughly research California exemption laws, the type of assets you could exempt, and which exemption system to use before bringing your bankruptcy case.
Comply With all Bankruptcy Procedures and Rules
Every bankruptcy court has its local bankruptcy procedures and rules all debtors should follow. Additionally, after filing bankruptcy, you should give the bankruptcy trustee supporting documents like tax returns and pay stubs. The trustee might also have more guidelines and requirements to meet.
If you fail to adhere to all the local rules in the area, it could result in delays or even case dismissal. You could find the bankruptcy court local rules by visiting the court's official website.
File the Right Bankruptcy Forms
When filing for bankruptcy, you should complete numerous forms, including your schedules, petition, and statement of financial affairs. If you do not have legal representation, you should know which forms to bring and complete.
You could acquire your bankruptcy forms from the bankruptcy form page of the U.S. Courts' official website. Also, your local bankruptcy court could require you to fill out more forms.
Complete Bankruptcy Education Requirements
If you want to file for bankruptcy and obtain a debt discharge, you should complete a debtor education and credit counseling. The purpose of credit counseling is to determine whether you should file bankruptcy or whether a repayment plan could get you on your financial feet again. The education requirements are required irrespective of whether you do not want to repay your loans or find them unfair.
Even if the repayment plan proposed by your credit counseling agency is viable, you do not have to agree to it. Nevertheless, you should file the plan alongside your bankruptcy papers.
You should complete the following:
- Credit counseling— Before you file bankruptcy, you should undergo credit counseling from an agency. When filing bankruptcy, you should bring a certificate of completion with the bankruptcy court. Otherwise, the judge will dismiss the case.
- Debtor education — Following your bankruptcy case filing, you should complete a debtor education course (personal financial management course). If you fail to meet this requirement, the judge will not grant a debt discharge.
Keep Your Non-Dischargeable Debts Current
Typically, bankruptcy doesn't discharge loans like taxes, student loans, alimony, and child support. That means you will still be required to pay these debts even after a successful bankruptcy case filing.
Keep Track of Deposits and Withdrawals
The bank trustee reviews the bank statements. The bankruptcy trustee could raise questions about massive deposits and withdrawals affecting your case outcome. Therefore, you should remember the origin of your money or avoid confusion in your petition. For example, if you paid school fees for your daughter, make sure you have all your receipts and use them as proof in your case.
Separate All Your Money
If you've funds that should be protected, like social security or personal injury settlements, you should be clear about the source of the money. It is recommended that you separate these funds from standard bank accounts to avoid raising questions when bringing bankruptcy.
Keep Track of Your Expenses
As previously stated, you should disclose your expenses. Most debtors cannot tell where their money is going. Since you want to be accurate with your bankruptcy filing, be sure to account for that. Some expenses might be unreasonable or questionable, while the bankruptcy trustee could permit others but question them if higher than usual. To avoid all this, keep documentation if you should establish it later.
Fulfill Bankruptcy Disclosure Requirements
Filing bankruptcy in Los Angeles is a transparent and straightforward process. While you can exempt the assets you need to maintain your household and work, your lenders are entitled to the rest. Therefore, you should disclose your financial circumstances in the paperwork before leaping the benefits of filing bankruptcy.
The bankruptcy judge makes sure that lenders receive their share by analyzing up to ten years' worth of previous financial transactions. Any debtor filing bankruptcy should report their prior transactions on Your Statement of Financial Affairs for Individual Filing for Bankruptcy form. Please remember to file your SOFA form alongside the official bankruptcy paperwork.
Suppose the court learns that a debtor transferred assets to dodge paying creditors or violate other bankruptcy rules. In that case, the bankruptcy court will reverse the transactions and distribute the assets to creditors.
Here are what you should include:
- Source of your previous income
- Payments made before bringing bankruptcy
- Prior and current repossessions, foreclosures, and legal action
- Contributions and gifts to other people
- Losses due to gambling, fire, and theft
- Sold, closed, transferred, moved financial accounts
- Property transfers
- Things you are holding for another person
- Environmental challenges that you know about the assets
- Status of ongoing and previous businesses
- Storage units and safe-deposit boxes
After completing, you should sign a statement per penalty of perjury indicating that the details submitted are correct. Any attempts to defraud the bankruptcy court could result in severe criminal penalties.
If you fail to file all your paperwork, the court could dismiss the bankruptcy case, or you might be required to file extra papers to rectify your paperwork and incur additional fees. If you omit your creditors, that loan won't be discharged. And, if you forget to include property, the bankruptcy trustee might find it and seize the asset.
What Not to Do
When experiencing financial challenges, it is tempting to do whatever it takes to lower the pressure. However, as previously mentioned, bankruptcy cases go more smoothly with planning. In the section below, you will learn why you should not do the following things:
Do Not Fail to File Your Income Tax Returns
If a person is not supposed to file their tax returns because they obtain disability insurance, they shouldn't worry about this Chapter 7 case requirement. Nevertheless, if they should file their taxes but have not done so for the previous two (2) years before bringing bankruptcy, they might run into trouble.
Tax returns are paramount in determining the previous and current asset holdings and earnings. It also satisfies possible priority tax claims. Without the returns, completing paperwork and a Chapter 13 repayment plan will not be possible and will stop the bankruptcy process. For example, the Internal Revenue Service (IRS) cannot determine the tax responsibilities with tax assessments.
Do Not File Bankruptcy When You're About to Receive Significant Assets
You should reconsider bringing your bankruptcy case if you're about to receive a substantial income tax refund, settlements from a suit, repayment of debt you made to another person, or inheritance within a year. After receiving the funds, chances are you will not be bankrupt, mainly if you can use the money to pay your lenders. If this is the situation, speak with a qualified bankruptcy lawyer to discuss the available options.
Avoid Making Preference Payments to Your Lenders
If a loved one or business partner has lent you money, you might be tempted to repay the loan before bringing a bankruptcy case. When you bring bankruptcy, the trustee will analyze the payments you made one year before filing to ensure some lenders did not receive preference payments (unfair advantage). The bankruptcy trustee will take back all preference payments you made within a year, provided the payments were made to a close business partner or loved one, and distribute them among your lenders. If the associates or relatives cannot provide the funds you paid them, the trustee could press legal action against them to recover the money.
If an Entrepreneur, Do Not Pay Yourself a Back Pay or Bonus
According to the bankruptcy system, an entrepreneur is an inside creditor. Therefore, if you pay yourself a bonus, take funds out of your company, or repay a debt that your business owes you during a year before filing bankruptcy, it is considered preference payments. If deemed bankruptcy fraud, it can result in case dismissal and serving a jail sentence.
Do Not be Quick to File Bankruptcy
Bankruptcy works best to wipe out debts, and you have a right to receive a discharge. Therefore, you should examine when it is the right time to file your bankruptcy. You could receive a discharge eight years and six years following a Chapter 7 and Chapter 13 bankruptcy, respectively.
During your waiting period, you could find yourself facing more severe financial challenges like a health condition that accumulates medical bills that you will want to hold off until the condition stabilizes. Other challenges that could come up include eviction, car repossession, foreclosure, and unemployment.
If you have previously filed Chapter 7 bankruptcy, you cannot file the case again and get a discharge. Your creditor could seize your valuable assets, garnish wages, levy money in the bank account. However, Chapter 13 bankruptcy might be available. You will require adequate income to be eligible and pay the debts using the discretionary income for three to five years.
You Should Also Not Wait Too Long to File Bankruptcy
Sometimes, you should file bankruptcy quickly. For instance, if your creditors are garnishing your wages, the sooner you bring bankruptcy, the more funds you will have to foot your bills.
You should also file bankruptcy quickly if the creditor has pressed legal action against you. The bankruptcy attorney will assess the complaint to check whether it involves fraud allegations. If so, you should file bankruptcy before your case proceeds to judgment. Should the creditor prevail in the money judgment, its lien rights will allow the creditor to attack bank accounts, garnish wages, repossess your motor vehicle, and foreclose on the home. Generally, if you bring bankruptcy before your lender wins the case, your bankruptcy case will wipe out your debts and stop the suit.
Do Not Move Your Property
While the bankruptcy schedule requests information about your assets, it can be tempting to transfer, hide, or sell the assets before bringing a bankruptcy case. Please do not do it. It could result in debt discharge denial and criminal consequences.
Typical forms of transfers that could land you in trouble are:
- Changing title to your spouse or child's motor vehicle that is in your name, into your spouse or child's name
- Removing your name from a joint account or changing the name on your bank account
- Removing your name from a business
- Depositing or moving money into another person's bank account
- Deeding real property in your name to somebody else, notwithstanding it is a legal transaction that you paid a fair market value
Most people move assets out of their name because they fear losing the property in bankruptcy. Owning the property doesn't mean you can't file a bankruptcy case or will lose the asset. Your experienced attorney will advise you accordingly, including taking advantage of bankruptcy exemptions.
You might have sold the asset before bringing bankruptcy to foot expenses like a utility, food, and rent. Although doing so is not wrong, be prepared to explain the transactions and submit supporting documentation.
Do Not Use Your Retirement Funds
You could safeguard your retirement account in bankruptcy. Therefore, it is a costly mistake to use your retirement money to pay your debts, something that bankruptcy can wipe out. Before making the payment, consult with your skilled bankruptcy lawyer.
Do not Make Any Credit Card Purchase Before Filing for Bankruptcy
Unless you want to incur additional credit card debts due to necessities like food, gas, rent, you must stop using the credit card. If you purchase luxury purchases in credit just before filing for bankruptcy, your creditor could object to your discharge. However, you could continue using debit cards.
Find Skilled Bankruptcy Attorney Near Me
The process of filing bankruptcy could be overwhelming. There are numerous things that, if not well done, could lead to costly and time-consuming mistakes. It could also result in delays or case dismissal. At Los Angeles Bankruptcy Attorney, we could help you with all aspects of bankruptcy. To get started, we'll discuss essential dos and don'ts before, during, and after filing bankruptcy. Call us today at 424-285-5525 to schedule your initial consultation.