For our clients and friends, we have compiled the following list. It is the top 10 things to do before filing a Chapter 7 or Chapter 13 bankruptcy.
Disclose All of Your Income, Expenses and Assets
Anyone filing a Chapter 7 or Chapter 13 Bankruptcy in New Jersey must disclose all information. This information includes all income, expenses and assets in their petition. The backbone of bankruptcy is the automatic stay. However, under the bankruptcy code, creditors are treated according to the type and priority of debt. Without full disclosure, treating all parties fairly cannot take place. It is not the bankruptcy court’s duty to find your assets. Nor is it the duty of your case trustee. It is the bankruptcy filer’s duty to be open and honest. If you have not fully disclosed everything you may not only lose your right to a discharge of your debts. Also, you may face criminal charges including fines.
Do Not Borrow Funds or Take an Early Withdrawal from an Individual Retirement Account or 401(k) Plan
Bankruptcy provides exemptions to protect assets such as retirement funds. We meet with client after client that has unfortunately borrowed or withdrawn from their retirement accounts. They deplete all of their retirement money trying to pay off debts or stay afloat. You must weigh all the positives and negative before choosing to withdraw or borrow against your retirement accounts. Bankruptcy provides exemptions that can protect for the average person all of their retirement funds. You can file bankruptcy and still keep your retirement.
Do Not Transfer Money or Assets to Friends or Family Members
You cannot transfer assets to hide them. For example, don’t transfer your car to a friend or family member 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. When filing bankruptcy the sole goal is to successfully discharge all of your eligible debts. Transferring assets in an attempt to hide assets will only complicate your bankruptcy case. It may also have your right to a discharge take away.
Do Not Continue to Use Your Credit Cards
One of the most common complications in a consumer bankruptcy is the use of credit right before filing for bankruptcy. The problem is the recent use of credit is circumstantial evidence proving the user never intended to repay the debt. If you are unable to pay your bills as they come due how can you incur more debt? Do not continue to 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.
Save Your Pay Stub or Proof of Income Each Month
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The BAPCPA changed the bankruptcy code and creating what is commonly called 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.
Do Not Take a Cash Advance on a Credit Card
Taking a cash advance close in time to filing bankruptcy can be a huge problem. This can be a problem for the same reasons detailed in Number 4 listed below. It really depends upon the circumstances. However, don’t take a $5,000 cash advance on a credit card three weeks before filing bankruptcy. For if you do, the credit card company will come calling when you file bankruptcy. An adversary alleging fraud could be the likely result.
Review and Document Self-Employment or 1099 Income
If you are self-employed or receive 1099 income it is essential that you know tow things. You must know your income and your expenses for each of the six-months prior to filing for bankruptcy. Just like in Number 6 below, the Means Test uses a six-month average of your income to determine if you have disposable income available to creditors each month. Determining what your take home pay is when self-employed or receiving 1099 income is always time consuming. But it is absolutely necessary prior to filing bankruptcy.
File All of Your Tax Returns
In 2005, BAPCPA provided new guidelines for the filing of tax returns and bankruptcy. 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 of their tax returns for the previous four years. This is one of the standard questions asked by the standing chapter 13 trustee at the meeting of the creditors.
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 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.
Do Not Wait To Speak To An Experienced Bankruptcy Attorney
Even if you are not ready to file bankruptcy speaking with an experienced bankruptcy attorney is essential. It will give you the information you need to make educated decisions.
To determine if you are speaking with an experienced bankruptcy attorney, ask the attorney:
- What other areas of law do you practice?
- How long have you practiced bankruptcy law?
- How many bankruptcy cases have you filed?
- Who are the trustees in the jurisdiction?
- What documents do each trustee requires?
If the attorney does not know the trustees and what each of them requires, they don’t regularly file bankruptcy cases. One the most common problems we face is meeting with potential clients when it is already too late. If you have been served with a summons and complaint you need to speak with a bankruptcy attorney. If you owe taxes and the IRS or FTB has indicated, they are going to garnish your wages you need to speak with a bankruptcy lawyer when Filing a Chapter 7 or Chapter 13 Bankruptcy.
Contact Us Today When Filing a Chapter 7 or Chapter 13 Bankruptcy in New Jersey
It is important to address these top 10 things to do before filing a Chapter 7 or Chapter 13 bankruptcy. Lucid Law can help you manage the list and your unique circumstances. If you have questions regarding bankruptcy, contact Lucid Law to schedule your personal consultation.