Timing is crucial in bankruptcy. The day you file, you must list all your debts and all your assets as of that day. But the day you file is up to you and your lawyer. That is one of the many decisions you'll have to make. In these articles, I'll tell you what goes into making those decisions in the crucial days or weeks leading up to the filing and make suggestions on what to do-and not to do-to make your case go smoothly.
DON'T: Make Last Minute Charges
Let's back up a bit to the day you decided that you would file for bankruptcy protection. As soon as you think that bankruptcy is in your future, you should immediately stop adding to the debt.
Don't charge anything. In fact, it's a good idea to tear up the credit cards, unless your attorney wants to take care of that. I know people who were told by friends or relatives that they could go ahead and "take what's left" of the credit lines of their accounts before they filed bankruptcy.
What does this mean? It turns out they were talking about charging right up to their credit limit and then filing bankruptcy, when they owed an even higher amount. This is wrong. First, it's fraudulent because they know when they're incurring the debt that they have no intention of paying it back.
Even if it weren't morally wrong (which it is), it is legally risky.
Under bankruptcy law, creditors can object to a particular debt being wiped away. The typical reason is fraud. When the creditor gets the notice that you filed, it takes a look at your account history. If it sees a bunch of charges right before filing, it will get suspicious. The creditor can claim that you planned to take money that you had no intention of repaying.
That doesn't mean the creditor will automatically cause trouble. If the amounts were small, the creditor might not bother about it. But you shouldn't give the creditor any reason to be suspicious.
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Credit - Pre-Bankruptcy Tips, Part 2
DO: Wait a Few Months Before Filing
Under the law, the burden of proof is on the creditor to show that a particular debt should not be discharged. This means that the debtor doesn't have to prove that he or she didn't intend to defraud anybody. It's up to the creditor to prove that intent. So, how can a creditor get inside the debtor's head and show that the debtor wanted to take the money with no idea of paying it back? Creditors can show a presumption of fraud by the circumstances surrounding the charges.
For example, they can point to amount and the timing. If you charged more than $500 for luxury goods or services to a single creditor within ninety days of filing, it's presumed that you didn't intend to pay it back. The same presumption is made when it's a cash advance of more than $750 within seventy days of filing. The bankruptcy code doesn't spell out what constitutes a luxury, but you don't want to be in a position where that determination is being made by a judge.
Again, the less attention you attract, the better. So in cases where you have made questionable charges, you must hold off on filing until at least 120 days have passed. The extra time is just a little insurance. Filing on the ninety-first day after a big charge might throw up a red flag of its own. Generally speaking, the more time that passes since the charges, the less likely the creditor will object.
Of course, there are times when you can't wait to file for some reason, for example, to stop a foreclosure or a wage garnishment. But if there is no strong reason to file right away, it's best to wait a bit.
DO: Pay Something Toward Recent Charges
Those who have charged something large recently, a good advice is that they make some payments to that creditor in the meantime. When the creditor looks at your account, it will look at the recent charges, but it will also look at the recent payments. If you make a large charge right before filing and then make no payments, it will look fraudulent. But if you let some time pass and you make a few payments after the last charges, it looks as if you are indeed trying to pay it back. Think of it as putting an extra quarter in the parking meter. It may not be necessary, but it's a small price to pay to avoid a larger expense down the line.
At the same time, you probably don't want to pay those other guys anything. You can probably safely stop paying on your unsecured credit cards. Except for the situation I described above, you'd be throwing your money down a rat hole. It won't make a whole lot of difference if you manage to send off a $20 minimum payment right before filing. The account will be included in the bankruptcy and it doesn't matter if the total ends up being $2,476 or $2,456.
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Credit - Pre-Bankruptcy Tips, Part 3
DO: Pay Your Basic Expenses-And Your Lawyer
Also, you'll need whatever cash you have for other things. Some people let the rent slide so they can send something to that persistent fellow calling from Discover. You have to take care of your family first and that means keeping a roof over your head. Of course, you should continue to pay your regular monthly expenses, such as the rent and utilities. If you are planning to keep a car that's being financed, you should try to stay current with that bill as well.
Besides the necessities, a better use of your money right now is to pay your lawyer. Once you've decided that you're going to file bankruptcy, you'll need some legal help. Ideally, you will actually hire an attorney to handle the case for you. Even if you decide to try to go it alone, at some point you should seek professional guidance. Even if all you do is pay for a one-time consultation, you'll need some cash to do that. You've got to prioritize and put your limited resources where they will do the most good.
DON'T: Show a "Preference" to One Creditor
Another factor in paying creditors right before filing involves something called preference. The court doesn't want you to play favorites and pay a chunk of money to some creditors and not pay the rest. It could reach back before the filing and take the money back from that creditor and then spread it around to everyone. This doesn't happen very often but it's something to consider in the days before filing.
It's assumed that a payment is an improper preference if it's more than $600 and made to a single creditor in the ninety days before filing. It doesn't matter if the payments were made all at one time or more than once during the ninety days. If the total is more than $600 in the time period, the payments could be considered to be a preference.
The time period in question is much longer if the creditor is considered to be an "insider," for example, a close relative. In those cases, you have to tell the court if you paid a total of $600 or more for a whole twelve months before filing. So it's not a good idea to pay back your mom a large amount just before you file bankruptcy. The court could very well take it back. You might be wondering how the court would know if you did that. It will because you have to tell it. You sign your bankruptcy papers under penalty of perjury. The worst thing you can do is lie.
By the way, if you can, you should keep your car payment current during this time. It probably adds up to more than $600 in three months. But since the car loan company is a secured creditor, the court won't take those payments back. It only acts when one unsecured creditor gets a large advantage over others in the same category.
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Article Source: http://EzineArticles.com/?expert=Nate_Perrott
DO: Choose Your Filing Date Wisely
Another factor that goes into the timing of filing of a bankruptcy concerns your property. The day of the filing is like a picture being taken-it shows all your debts and all your assets as of that day. For example, you probably put down in your paperwork what you might have in a checking account. Obviously, money goes in the account and money flows out of the account. If you can, you might want to choose as your filing day a time when there's not as much money, for example, right after the rent has been paid.
DON'T: Hide Assets
Some people want to go too far with this and actually hide their assets. They take all the money out of their bank accounts before they file and stick it under the mattress or give it to their brother to hold for them.
Neither scenario will work. Either way, the money is still their property. They still have to list it on their petition, but under the "cash" heading instead of the "checking account" heading. And if they gave the cash to a brother, they'd also have to mention him as the person in possession of the property.
DO: Carefully Consider How You'd Justify Selling Assets Before Filing
Other people want to sell off their property right before filing. This can be appropriate, but you should be careful. It might make sense to liquidate some property that wouldn't be protected under your state laws. You could sell something and then use the money to catch up on your basic expenses and pay your bankruptcy attorney. You could also use the proceeds to pay a debt that wouldn't be discharged anyway, such as recent taxes or child support. In that situation, you'd be doing yourself what a bankruptcy trustee would do anyway.
Let me explain. If you did have property for the trustee to take, he or she would sell it and then use the money to pay your creditors, starting with the priority creditors. In effect, you'd be doing this on your own, selling something that can't be protected and giving the money to a debt that can't be discharged.
You'd still have to tell the court about this: first that you sold something and second that you paid someone. But the court would be unlikely to disturb a transaction that has the same result as if the court had taken care of it. You have to make sure that you can justify the circumstances.
For example, if you sold your car to that helpful brother of yours for ten bucks, the trustee would raise an eyebrow. You can't take less than full value for something to keep the money away from your creditors.
A certain amount of pre-bankruptcy planning is allowed. But it's hard to say exactly how much would be allowed in your case. Courts have interpreted this in different ways. You'll need to talk to a lawyer in your area to find out what is acceptable in your jurisdiction.
The main rule is to disclose, disclose, disclose. First tell your lawyer everything about your case and get some guidance on what you should do. Then, make sure that everything is listed somewhere on your petition when you file. The most trouble you can get into with a bankruptcy court is by hiding something.
DO: Get Credit Counseling
It's now required anyway. So you may as well get it over with. There can be a long wait to get an appointment to see a counselor. You don't want to be in the position of being ready to file and unable to do so because you haven't taken care of this. There is a way to file first and then get the counseling. But you'd have to show special circumstances. Again, you don't want to do anything to draw attention to yourself in bankruptcy.
I got my free credit report at http://www.securecreditadvice.info, it is hands-down the most reputable credit report company online. Customer testimonials and feedback have been excellent for this company.
Article Source: http://EzineArticles.com/?expert=Nate_Perrott
