In an ideal world, we would all be taking on debt that can be repaid easily without glitches over time. But, in reality, tough circumstances lead to defaults, and despite following all the rules in the book to avoid bankruptcies, we may end up filing for one. If you filed for bankruptcy recently, know that you are not alone. In the US, 418,400 non-business bankruptcies were filed in the year ending September 30, 2021. Over 117K bankruptcies were filed in Chapter 13 alone. By filing for bankruptcy, you can work towards a fresh start. The strategy is frequently and strategically used in the corporate world.
Image Source: United States Courts
However, filing for bankruptcy is only a small part of the procedure. There are lots of things you need to get right to ensure a favorable outcome. Here are 3 things you need to take care of.
Tip #1: Choosing the Right Bankruptcy Attorney
Firstly, you need to hire a reputed bankruptcy attorney to help you with the process. Some ways in which a lawyer can help you are:
Explain your options. Lawyers know the intricacies of bankruptcy laws and can find the best solution for you.
Detailing exactly what assets you can keep and which you need to sell, based on the type of bankruptcy
Provide guidance and representation at the court hearings, and meet with trustees and creditors
Provide tips on what to avoid to save your time and resources
Help with the paperwork
Provide information about rebuilding credit history, post-bankruptcy
The right lawyer can make all the difference in the procedure, right from negotiating terms with your creditors to reminding you about important deadlines.
Tip #2: Be Honest About Your Financial Circumstances
Research proves that bankruptcy is always associated with a lot of stigmas. While this stigma can encourage us to make wiser financial decisions, for debtors who face uncontrollable life situations, this is burdensome. You must be facing similar hesitancies while you discuss your financial difficulties with your attorney. However, your lawyer is the one person you need to be completely honest with. Be upfront about your debt, monthly income, and any assets you possess.
Remember, that your Trustee will ask you if you have transferred, sold, or disposed of any property in the last 6 years, in the 341 meetings. So, refrain from the urge to sell off or dispose of any property before the bankruptcy filing. If you simply transfer property in the name of a family member, the court will frown upon it, which will have repercussions.
Tip #3: Don’t Use Credit Cards Anymore
Don’t max out on your credit card, simply because the debts will be discharged anyway. Stop using credit cards at least 90 days before the filing. Your aim is to prove to the court that you are facing financial difficulties, and need a fresh start. If the court finds that you are still stacking up on credit card debt, you could face difficulties. There are many ways to break your plastic habit, pay with cash, use debit cards, hide the credit cards, or cut them up!
Ensure you understand all the pros and cons of the bankruptcy chapter you are filing for, to make an informed decision. While your lawyer will do most of the work for you, it doesn’t hurt to read about your options online too.