A large part of my practice is helping people who are experiencing financial difficulties. For those who need to file bankruptcy, we will prepare a Chapter 7 or Chapter 13 case. Chapters 7 and 13 are the two types of cases that are available to individuals. If you are headed down this path, the following is a list of things to do (or not to do) before filing an individual bankruptcy.
1. Gather and Disclose All information
Anyone filing a Chapter 7 or Chapter 13 Bankruptcy in Florida must disclose all information. You will need to list all your income, expenses and assets in your bankruptcy petition. You must be completely open and honest. Failure to disclose everything could lead to the dismissal of your case. Even worse, it could expose you to criminal charges and fines. You need all documentation for your individual bankruptcy.
2. Leave Your Retirement Accounts Alone
Bankruptcy provides exemptions to protect assets such as retirement funds. Do not go into your IRA, 401k or other retirement plans to pay off debt. You can file bankruptcy and keep your retirement money.
3. Do Not Transfer Money to Friends
You cannot transfer assets to hide them. For example, don’t transfer your car to your buddy before filing bankruptcy thinking it will reduce your assets. You must disclose these types of transfers. Failure to do so will only complicate your bankruptcy case leading to unnecessary problems and headaches.
4. Stop Using Credit Cards
One of the most common complications in a consumer bankruptcy is the use of credit leading up to filing for bankruptcy. The problem is the recent use of credit is circumstantial evidence proving the user never intended to repay the debt. Do not use your credit cards if you are not making payments to your creditors. If you are having trouble paying your credit cards and are missing payments, you need to stop incurring more debt. Further, do not take any cash advances on your credit cards.
5. Save Your Pay Stubs
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act which created the Means Test. The Means Test is based upon local and national standards for expenses. The Means Test also uses the six-month average of your gross income extrapolated to 12 months. You will need all six months of your pay statements or other proof of income.
6. Gather Your Tax Returns
If you file for bankruptcy, you will need to provide your tax return for the previous year. You may also need to provide your tax return for the current year if requested. Failure to file your return that becomes due after you file for bankruptcy can cause the IRS to request a dismissal of your bankruptcy case. Section 1308 of the Bankruptcy Code requires Chapter 13 filers to have filed all their tax returns for the previous four years.
7. Review Your Monthly Expenses
All consumer bankruptcy petitions include Schedule J. Schedule J is the estimate of the average or projected monthly expenses for your household. These estimates are for when the bankruptcy case is filed. Prior to scheduling a consultation with a bankruptcy attorney, take a few minutes to review your bank account statements. This will give you a better idea of where your money is going each month. This will also help to determine if you have any disposable income available to creditors.
Before filing an individual bankruptcy, Chapter 7 or Chapter 13, please review this list. As some of these things are quite technical, call me with any questions.
