Filing for bankruptcy is a big step, which will have long-term financial implications. However, it also presents you with the opportunity to wipe the slate clean and start fresh, free from quickly-escalating debt.
Before you take the plunge, pre-bankruptcy planning in The Woodlands, TX can help. You need to know what you can and cannot do (like transfer your assets to a family member for safekeeping) so as not to jeopardize your proceeding. It’s also important to learn more about your assets and potential exemptions so you’ll know what to expect from the process. The best thing you can do is consult with a bankruptcy attorney. In the meantime, here are our best pre-bankruptcy planning tips in The Woodlands, TX.
What not to do before your bankruptcy filing
- Don’t move your assets: Bankruptcy is designed to be a transparent procedure, in which you list all of your assets so that the court can determine how you might repay your creditors. This might include homes, cars, family heirlooms and other high-value items. You might be tempted to transfer these to your family or friends (or “forget” to list them altogether)—but you should not. This violation can lead to criminal penalties and/or your filing being denied. Don’t worry if you sold assets to pay for food, shelter and other necessities—that can be explained in your filing—but you will need to be transparent about what you did and why.
- Don’t decide which creditors to repay: Some debtors figure they’ll pay off one loan and ignore the rest, like debts to friends and family. If you do this within one year of filing, or pay one creditor within 90 days of filing, it’s considered preferential repayment and can actually be reversed during bankruptcy.
- Don’t file right before you receive a large lump sum: If you’re about to inherit or otherwise receive a large sum of money, don’t file for bankruptcy. The new income could mean that you’re not bankrupt any longer, or you can settle with your creditors.
- Don’t forget to file your taxes: If you’re required to file taxes, you must do so for the previous two years before filing for bankruptcy.
What to consider before filing for bankruptcy
- Be prepared to deal with your bank: Often, your bank will freeze your account when they get notice of a bankruptcy filing. Sometimes this means you’ll be unable to access any money above the exemption amount. If you have post-filing income and your account is frozen, be prepared to call the bank and get it sorted out.
- Stop automatic payments: If you have set up auto-pay for your bills, stop them as soon as possible.
- Understand your utility company may use your deposit: Your utility company can’t require you to pay past-due amounts after filing, but they may be able to use your deposit to cover all or part of that amount.
When you need help with pre-bankruptcy planning in The Woodlands, TX, James R. Jones, Attorney at Law can help. Call today for more information.