Preparing for Bankruptcy

Just mentioning the word “bankruptcy” often sends chills down people’s spines. It brings up visions of failure and the loss of everything they’ve worked for their entire lives.

The bankruptcy code, however, exists for very practical and humane reasons. Bankruptcy gives people who are overwhelmed with debt a fresh start in life, and rarely does it mean the loss of everything. In fact, it can often mean retaining everything you’ve accumulated but ridding yourself of nagging debts that haunt you day and night.

If you find yourself juggling payments on your bills, skipping some and paying the minimum for others, and the calls and messages start arriving to tell you that you’re behind, you may well want to consider bankruptcy as an option.

The first step is to take a rational look at your options and consult with a knowledgeable bankruptcy attorney. If you’re in or around Magee, Mississippi, or anywhere in the state, contact Ware Law Firm, PLLC. For more than 20 years, Attorney Daniel Ware has been helping individuals and families just like you resolve their financial hardships and get a fresh start in life.

How to Prepare for Bankruptcy

Some people, even when they realize bankruptcy is their only option to get their debt issues resolved, make mistakes that can slow or even endanger the process. For one thing, some see the period before bankruptcy as a time to go on a good ol’ shopping spree and run up their credit cards to the limit. This is extremely dangerous, however.

The bankruptcy court can refuse to honor any credit purchases rung up 90 days prior to filing for bankruptcy, and in a worst-case scenario, might even consider it bankruptcy fraud. Your best option is to retire your credit cards and realize they’re going to be gone the moment you file for bankruptcy, which probably isn’t such a bad thing because they no doubt contributed to your financial woes to begin with.

Some practical steps you need to take include paying off any tax obligations you have. You can’t discharge tax debt through bankruptcy, and the court will need to see your latest IRS filings before proceeding with your bankruptcy case.

Another practical step is to stop all automatic deductions from your checking or savings account. Depending on the type of bankruptcy you file, you will need to show disposable income as a qualifying factor.

Also, document every debt you have. Save or print out the credit card bill and other bills you receive each month, including for your mortgage and car loans.

What Not to Do in Preparation

We’ve already mentioned the peril of a shopping spree. On the flip side, so to speak, don’t draw funds from your retirement or savings account to pay off debts that are going to be discharged in bankruptcy. Generally speaking, this means all unsecured debts. Remember that certain obligations can never be discharged through bankruptcy, including most student loans, child and spousal support, and tax levies.

You need to act fast and file before a creditor can take you to court and win a judgment against you. If you’re been served notice of a lawsuit, you need to file immediately, and in fact, it’s probably a sign that you’ve been hesitating too long to take the action you need.

Also, don’t pay some creditors and not others if those debts are going to be discharged through bankruptcy. Treat all dischargeable debts equally lest you raise some questions from the bankruptcy court when you do file. At the same time, don’t take on new debt, even if you get an offer in the mail for a new credit card or personal loan.

Finally, don’t try to transfer or hide assets. You may be tempted to sell your car to a friend or family member for pennies on the dollar with the understanding that you’ll buy it back when bankruptcy is over. The court will likely sniff this out and repossess the vehicle. Again, an act like this also flirts with bankruptcy fraud.

How Legal Counsel Can Help

While it may be possible to fill out all the paperwork and provide all the documentation to commence a bankruptcy on your own, it’s certainly not advisable. First off, you need to decide on which chapter of bankruptcy to file, and this depends largely on the extent of your debts and how much monthly income you have.

Chapter 13 of the bankruptcy code allows you to reorganize all your debts into one lump sum and one monthly payment, provided you have enough disposable income to make the monthly payment. In this case, you can usually retain your home and vehicles.

If you are behind on your home or car payments, you can include the arrears amounts in your reorganization plan to catch up over time. However, you will then be obligated to make your normal monthly payments unless you can get the lenders to refinance the loans to a lower monthly payment.

Chapter 7 is the liquidation option, but here again, many of your possessions are exempt from being sold off to satisfy creditors. In all forms of bankruptcy, your retirement accounts and pensions are exempt from seizure. In Mississippi, you can, for example, retain $75,000 of equity in your home, but to claim Mississippi’s exemptions, you must have lived in the state for 730 days. Otherwise, you’ll have to use the exemptions from your previous state.

Rely on an Experienced Bankruptcy Attorney

Filing for bankruptcy involves submitting multiple forms and reams of documentation concerning your income and debt. It is also an emotional and trying time if you attempt to go it alone. An experienced bankruptcy attorney can help you assemble and prepare all the documentation and then guide you through the process while relieving you of a lot of stress and unneeded worries.

If you’re in or around Magee, Mississippi, or throughout Simpson, Smith, Jefferson Davis, Covington, or Southern Rankin counties, contact Ware Law Firm, PLLC. Attorney Daniel Ware can assess your situation, discuss your options with you, and then stand by your side throughout the bankruptcy process until you get your fresh start.