Filing for bankruptcy is a major financial decision. Although there are many web sites and advertisements telling you that you can handle your own bankruptcy, there are numerous pitfalls and legal repercussions if you fail to follow the proper procedures.
Bankruptcy attorneys will initially advise you on whether you should be filing for bankruptcy and if other options are more appropriate. If bankruptcy appears to be your best option, then your bankruptcy attorney will determine what kind of filing you should consider and if you qualify.
Reasons for Filing
Facing financial difficulties or the possibility of losing your house does not automatically mean that bankruptcy is your sole solution. Not all debts are dischargeable and a bankruptcy will not necessarily save your house from foreclosure.
Your attorney can advise you if a debt is dischargeable. If your income is above your state’s median level or you do not meet the means test, you may not qualify for a Chapter 7 filing, which would discharge unsecured debt. A Chapter 7 will only delay foreclosure, but a Chapter 13, provided you meet the payment plan’s requirements, could save your home.
Filing Requirements and Consequences
To file a Chapter 7, you must meet your state’s median income or qualify under a means test. If your income is too high, bankruptcy attorneys can determine if your disposable income makes you eligible to file under this chapter. Your income includes wages, tips, commissions, unemployment, pension, or real property income.
Also, you must be aware of certain waiting periods, especially if you transferred property to a relative within a certain period. If you file too soon after that transaction, the bankruptcy court could invalidate it and the property could be seized by the bankruptcy trustee.
Preparing the Petition
A bankruptcy petition requires that you produce evidence of your income and property. You will have to show evidence of your monthly expenses, banking statements, pension and life insurance policies and values, proof of equity in your motor vehicles, home, and other significant personal property items.
All property and their values must be listed, including any real estate. The failure to list significant items could result in dismissal of your petition, loss of your property, and even criminal sanctions.
Bankruptcy attorneys and their staff can help you obtain these documents and prepare your petition according to the law.
Exemptions and Property
Many people considering filing are unaware of which assets are exempt from being seized by the trustee and which debts are non-dischargeable. For example, certain taxes and student loans are generally not dischargeable.
Each state lists certain exempt property and assigns a value. Although you may have some items that are worth more than the exempt value, your attorney can advise you if the trustee is likely to seize it or not, if that item could be exempt under some other section, or if it could be converted to exempt property. Do not attempt to do this yourself or you could risk criminal liability.
Although you may only have to make one appearance at a Creditor’s Meeting, you could face tough questioning from the trustee over questionable entries on your petition. Avoid this by having an attorney prepare your petition and prepare you for how to respond.
Having bankruptcy attorneys advise you and prepare your petition ensures that your case will move smoothly through the bankruptcy process with few if any complications.