So you want to file for bankruptcy? Before you file, there are some things you need to know. Many people who file for bankruptcy don’t realize that there are federal laws that prohibit you from doing certain things before you file. Violating these rules may lead to your bankruptcy case being dismissed. A dismissal allows your creditors to continue collecting on your debt. Follow these steps in preparing for filing for bankruptcy.
Do Not Transfer Property to Family
Don’t do it. Transferring your car or your real estate to anyone prior to bankruptcy may violate several laws. The court has the ability to declare that those transfers were fraudulent. This can have a serious impact on both you and your family. Bankruptcy courts will “look back” over your finances for a period of time prior to your application to make sure you are not misleading your creditors or hiding assets. Not only could this type of activity result in your debt not being discharged, but you may be guilty of a crime.
File Your Tax Returns
Federal and state governments are heavily involved in the bankruptcy process. Failure to file your tax returns may result in tax liens and a more thorough examination of your bankruptcy application. As a result, failure to file your tax returns can also delay your bankruptcy proceeding. The trustee has the ability to prolong or even dismiss your case for failure to file tax returns.
Don't Run Up Your Debt
There are some people who decide, prior to filing for bankruptcy, to intentionally incur additional debt that they have no intention to pay for. This is fraud. The court has the ability to declare that you will still be on the hook for that debt. Furthermore, you could be investigated for criminal proceedings.
Gather Financial Paperwork
For each debt that you owe, you should begin preparing any documentation related to those debts. For example, if you owe credit card debt, obtain the credit card agreement and a statement of accounts. If you have a mortgage, get your mortgage agreement and an accounting of how much is remaining on your mortgage. It is also important to obtain proof of income for your family members such as paystubs and tax returns. This information will be invaluable for your attorney and will save time.
Contact a Lawyer
Bankruptcy is a complicated process. As evidenced above, creditors have a number of opportunities to examine your finances. If you have been moving debt around or incurring additional debt, you may not be eligible for a discharge and could remain on the hook for the debt. Therefore, it is important that you speak with a lawyer to avoid these, and other, mistakes.