Declaring bankruptcy is a wise choice in many situations. Garnishments, job loss, medical issues, unemployment, and divorce are common reasons for filing bankruptcy. Filing bankruptcy will allow you to start fresh. We will get you out from under your debt.


Chapter 7 Bankruptcy

In order to file a Chapter 7 bankruptcy, you must undergo credit counseling through an approved agency. The course can be taken online. The credit counseling must be done within 180 days of filing. Our office will make these arrangements for you, if you wish. A "Means Test" must also be passed prior to filing a Chapter 7 case. The means test determines whether or not you have enough income to pay down any debt that you owe. If you are financially able to repay, you won't be eligible to file a Chapter 7 case. You may also be ineligible to file a Chapter 7 case in the event you've had a bankruptcy petition dismissed within the past 180 days. However, you may file again after the 180 days have passed.


Once you file your case, the automatic stay will go into effect. This will stop all collection activities (subject to a few exceptions) including, but not limited to: garnishments, phone calls, and lawsuits. You will be assigned a trustee for your case and will receive notice of the 341 meeting you will attend. The 341 meeting is an informal hearing where you will answer questions about your bankruptcy petition. It's nothing to be nervous about. The meeting isn't in a court room, you and your attorney will meet with the assigned trustee at the meeting place. The meeting generally lasts 5-10 minutes. In most routine bankruptcy cases, the 341 meeting is the only formality you are required to attend. However, in some cases, court appearance(s) will be necessary. A course on financial management must also be taken before you will receive your discharge. A few months later the Bankruptcy Court will issue your discharge. After you receive your discharge and the bankruptcy case is closed, the bankruptcy process is complete and your eligible debts will be eliminated.


Common Bankruptcy Mistakes to Avoid


•  The moment you decide to file bankruptcy, don't take on more debt. This would constitute bankruptcy fraud because you would have no intention of repaying the debt. Creditors are not likely to object to small charges, however, just don't charge anything.


•  Don't take a withdrawal from a retirement account. Virtually all retirement accounts are protected and are not part of your bankruptcy estate, which means you don't have to worry about trying to exempt them on your bankruptcy petition. However, once you take money out of a retirement account, you could end up losing the funds.


•  Don't hid assets from the bankruptcy court. Always be honest, if not you could face having your case dismissed and criminal penalties.


•  If you owe money to a bank or credit union and also have a checking or savings account with them, close the account and open a new account with another bank before you file.


•  Be careful when doing pre-bankruptcy planning. If you decide to liquidate unprotected property and then pay basic living expenses, make sure you disclose everything to your bankruptcy attorney and on your petition.


•  Make sure the timing of your bankruptcy case is proper. For instance, you are entitled to recover wage garnishments taken within 90 days of filing bankruptcy, in the event they exceed $600 (as of 2014). If less than $600 has been taken from you during this period (preference period), then simply wait to file bankruptcy until you reach the $600 amount. Otherwise, you won't be entitled to recover anything. Also, if your income lately has been uncharacteristically high and your having difficulty passing the means test, simply waiting a few months or so could allow you to pass the means test.


•  Don't stop paying on cars and houses you intend to keep. A chapter 7 bankruptcy will prevent you from being personally liable on a car loan or mortgage should you default (creditor won't be able to sue you), but it won't prevent foreclosure or repossession. It may delay such events, but if you want to keep your car or home you must continue to make payments.


•  Don't pay back family or friends within a year of your bankruptcy filing. These payments are called preference payments and the court may avoid them. Also, don't pay back creditors within 90 days of filing bankruptcy (not including regular payments such as rent, utilities and car payments). Such payments could be avoided by the bankruptcy trustee as well.


•  If you are anticipating an inheritance within the next year, do not file bankruptcy.


•  Do not file bankruptcy when someone owes you money and the amount owed is unprotected, because the trustee will collect that money and use it to pay creditors.