In Bankruptcy Timing And Planning Go Hand-In-Hand
Just like in life and business, good planning will help you be successful at anything you do as well as save you money.
This is the same in a bankruptcy filing.
Proper planning will allow the debtor to leave bankruptcy with a successful discharge, were sloppy planning will end up in a disaster.
To be successful at planning when filing bankruptcy in the first place people should consult a bankruptcy attorney to find out what they need to do.
Before consulting a bankruptcy attorney, some individuals try to make their own financial decisions to prepare themselves to file for bankruptcy.
This could end up with disastrous results that could result in the loss of property and even the possibility of not qualifying to file Chapter 7 bankruptcy.
Ask any bankruptcy attorney and they could give you a list of stories of how a debtor tried to fix it before filing bankruptcy.
Common mistakes that are made include, selling property to pay a debt or even borrowing money against their house and the worst one is taking out money out of their 401(k).
What the debtor doesn't realize is according to the bankruptcy court, these are all incomes.
If someone unemployed buried under a mountain of unsecured debt that easily qualifies to file Chapter 7 bankruptcy decides to take out a little cash out of the equity in their home or 401(k) might disqualify themselves to file.
When filing Chapter 7 bankruptcy the debtor is required to take a means test that basically takes the last six months income and averages it to get an annual income to compare against the median income chart for their state.
If the debtor takes out $50,000 against their house or 401(k), thinking it will be protected in the bankruptcy filing, the bankruptcy court will see this as income for the debtor.
This will increase their average monthly income and possibly disqualify them to file for bankruptcy.
In this situation, the bankruptcy attorney would usually just postpone the bankruptcy filing until their income average dropped to an amount that they would qualify under.
Another interesting side note is depending on the situation the cash that is received might become property of the bankruptcy estate and otherwise would've been protected by bankruptcy exemption laws if it had been left alone where it was.
There are many things that a debtor should not do prior to filing for bankruptcy.
Most average Joe's don't know what those things are and this is where they get into trouble.
There are things as small as paying debts prior to the bankruptcy.
Any debt that is paid might be under the scrutiny of the bankruptcy trustee.
If the bankruptcy trustee believes that the debtor paid a friend or family member money back prior to filing for bankruptcy, the trustee might see this as a preferential payment and ask for the money to be returned to become part of the bankruptcy estate.
These are all things that should be discussed with a bankruptcy attorney prior to deciding to file.
When a debtor gets into financial trouble, even if they're not ready to file bankruptcy, they should visit a bankruptcy attorney to get an idea of planning and timing of a bankruptcy filing.
This will avoid a lot of headaches in the future.
This is the same in a bankruptcy filing.
Proper planning will allow the debtor to leave bankruptcy with a successful discharge, were sloppy planning will end up in a disaster.
To be successful at planning when filing bankruptcy in the first place people should consult a bankruptcy attorney to find out what they need to do.
Before consulting a bankruptcy attorney, some individuals try to make their own financial decisions to prepare themselves to file for bankruptcy.
This could end up with disastrous results that could result in the loss of property and even the possibility of not qualifying to file Chapter 7 bankruptcy.
Ask any bankruptcy attorney and they could give you a list of stories of how a debtor tried to fix it before filing bankruptcy.
Common mistakes that are made include, selling property to pay a debt or even borrowing money against their house and the worst one is taking out money out of their 401(k).
What the debtor doesn't realize is according to the bankruptcy court, these are all incomes.
If someone unemployed buried under a mountain of unsecured debt that easily qualifies to file Chapter 7 bankruptcy decides to take out a little cash out of the equity in their home or 401(k) might disqualify themselves to file.
When filing Chapter 7 bankruptcy the debtor is required to take a means test that basically takes the last six months income and averages it to get an annual income to compare against the median income chart for their state.
If the debtor takes out $50,000 against their house or 401(k), thinking it will be protected in the bankruptcy filing, the bankruptcy court will see this as income for the debtor.
This will increase their average monthly income and possibly disqualify them to file for bankruptcy.
In this situation, the bankruptcy attorney would usually just postpone the bankruptcy filing until their income average dropped to an amount that they would qualify under.
Another interesting side note is depending on the situation the cash that is received might become property of the bankruptcy estate and otherwise would've been protected by bankruptcy exemption laws if it had been left alone where it was.
There are many things that a debtor should not do prior to filing for bankruptcy.
Most average Joe's don't know what those things are and this is where they get into trouble.
There are things as small as paying debts prior to the bankruptcy.
Any debt that is paid might be under the scrutiny of the bankruptcy trustee.
If the bankruptcy trustee believes that the debtor paid a friend or family member money back prior to filing for bankruptcy, the trustee might see this as a preferential payment and ask for the money to be returned to become part of the bankruptcy estate.
These are all things that should be discussed with a bankruptcy attorney prior to deciding to file.
When a debtor gets into financial trouble, even if they're not ready to file bankruptcy, they should visit a bankruptcy attorney to get an idea of planning and timing of a bankruptcy filing.
This will avoid a lot of headaches in the future.