How should I prepare for bankruptcy?

 Posted on April 12, 2021 in General Bankruptcy Topics

Even smart, responsible people can find themselves bogged down by debt. When this occurs, filing for Chapter 7 provides a way for you to get your finances under control, once and for all.

According to Kiplinger, you must prepare for a bankruptcy filing by taking the proper steps. Here are a few ways to help your case.

Curb your spending in the lead-up to filing

There is a belief that Chapter 7 discharges all debt. While it does relieve many types of debt, the court is very wary of fraudulent behaviors. As a result, your spending habits could land you in trouble.

Intentionally racking up debt prior to filing is bankruptcy fraud. The court typically checks the prior 90 days for suspicious purchases, such as vacations or luxury items. You are also not allowed to "sell" property to a friend or family member with the hopes of buying it back later. The court can reverse these transactions and seize the property for repayment.

Be prepared to disclose lots of information

Your assets will undergo a thorough accounting in bankruptcy court. You must answer all questions honestly and transparently. You must disclose all assets in your name, including retirement funds, money from investments, and other sources of income.

If you are dishonest about what you have, your case will likely get denied. If the court determines you concealed assets after the case has closed, criminal penalties can still apply.

Expect a lengthy process

Chapter 7 does resolve much quicker than Chapter 13, which can take up to five years to complete. However, Chapter 7 filings still take a lot of time from the initial filing to the discharge of your debts. While it depends on your specific financial situation, expect at least six months for the entire process to take place.

Being patient can help you navigate your case with as little stress as possible. Just keep thinking about the light at the end of the tunnel, when you can finally begin rebuilding your life free from financial stress and worry.