What To Consider When Using Bankruptcy

Are you ready to file for bankruptcy so that you can discharge your debts? If so, there are a few things that you need to know before you start the process.

Know Who You've Recently Paid Money To

One potential problem that can come from filing for bankruptcy is clawbacks. This is when the bankruptcy court will look at payments that you made right before filing for bankruptcy and possibly request that the money is returned. This is because it could be viewed as a preferential payment, which is not fair to other creditors.

If you recently paid back a debt to a family member or friend, know that the payment may need to be returned. You'll need to make sure that enough time has passed where it is no longer considered eligible for a clawback. This means potentially delaying your bankruptcy filing.

Know About Fraudulent Transfers

Are you worried about losing certain assets due to your bankruptcy filing? You may be tempted to sell an item to another person for far less than what it is worth, sometimes with the idea of getting that item back later. Know that this is not allowed, and it is known as a fraudulent transfer. This is considered illegal and could get you in a lot of trouble when it is eventually discovered during a bankruptcy filing.

Know All Of Your Creditors

You will need to come up with a list of all your creditors when filing for bankruptcy. It is important that you list all of your creditors on the bankruptcy petition because only the debts listed will be eligible to be discharged. You cannot go back and add a creditor after the bankruptcy has been approved, and you will be stuck with repaying that debt.

Know Where All Your Important Paperwork Is Located

Your bankruptcy trustee is going to request a variety of different paperwork as part of the bankruptcy filing. This includes proof of your income, the title to your car, the deed to your home, and previous income tax filings. Make sure that you can track all of these items down because you are going to need them to move forward with your bankruptcy filing. 

Know The Requirements For Approval

The bankruptcy process is not entirely in the hands of your lawyer once you hire them. There are things that you are responsible for, such as taking credit counseling and debtor education classes. Proof of completion of these classes will be required for your bankruptcy to be approved. 

For additional information or assistance with filing for bankruptcy, contact a local bankruptcy attorney today.