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Bankruptcy is a tool available to those who can no longer keep up with payments on their debts. By liquidating assets or setting up a repayment plan, it allows for filers to have a fresh financial start.
It is a legal process run by bankruptcy courts in the United States. Bankruptcy assists individuals and organizations to eliminate all or part of their debt or repay a portion of what they owe.
However, while bankruptcy helps you get out of debt, it’s critical to understand the long-term negative impact it has on your credit. Seven to ten years is how long a bankruptcy stays on your credit report. This restricts your ability to open credit cards and obtain low-interest loans.
Filing for bankruptcy is a complicated process that can be done on your own, but it will be smoother and involve less stress with the help of an experienced and compassionate Kentucky bankruptcy attorney. At the O’Bryan Law Office, we pride ourselves on helping clients obtain a clean financial slate.
How Do I Prepare for Bankruptcy?
When you file for bankruptcy, there is an automatic stay that goes into effect. This protects your assets from creditors’ collection efforts. However, you may want to take certain precautions to protect the money in your bank account during bankruptcy preparation and after filing for bankruptcy.
Before filing for bankruptcy, pay off any essential bills from your bank accounts such as utilities, child care, and groceries. This lowers the amount in your account and, as a result, lowers the amount that the bankruptcy trustee can take. Any funds in your bank account that do not qualify for an exemption will be taken by the trustee. Bank account exemptions are uncommon and only cover a small amount of money.
A bank may freeze the funds in an account once it learns of a pending bankruptcy filing. It does so to protect creditors. If your bank puts a hold on your account, ask the bankruptcy trustee to get the bank to lift the hold so you can access your money.
Steps To Prepare For Bankruptcy
There are several steps you can take in your bankruptcy preparation:
- If you choose to use the services of an attorney, you’ll need to select a bankruptcy lawyer.
- Gather all your bills and debts for your attorney. You’ll need to provide a full picture of your financial status.
- Your attorney should request a copy of your credit report.Your lawyer may advise you to file an emergency bankruptcy petition if it looks like a creditor is going to garnish your salary or levy your bank account.
- Don’t use any credit. The court checks to see if you took on any new debts in the 70 to 90 days before your filing. If borrowing money helps you pay for essentials such as food, gas, and housing, then keep detailed records.
- Stop paying back debts to unsecured creditors. Once your attorney gives you the okay, stop paying credit cards, collection agencies, or other entities that hold this type of debt. It doesn’t make sense to keep paying on these, because these debts are discharged in bankruptcy. Most importantly, don’t pay more than $1,000 to any unsecured creditor. Payments greater than what the creditor would receive in a bankruptcy, may be contested in court.
- Cut down on your expenses. Learn to live within your means and without relying on credit. Create a cash budget you can live with and include monthly bills like rent and utilities, as well as payments for items you will keep such as a car or home.
- Unless your attorney says you can do so, do not reaffirm debts during bankruptcy preparation. This means if you are retaining secured property like a car or home, do not agree not to discharge the debt in bankruptcy. This property isn’t protected by bankruptcy if you later get behind on payments.
- Have a plan for your financial future.Although bankruptcy shows on your credit report, it does not exclude you from obtaining credit. You’ll only be eligible for low-limit credit cards at first, but in time you’ll be able to create a strong credit history.
Bankruptcy is an intricate legal process – approach with caution. A Kentucky bankruptcy attorney can make the process simple and understandable.
Mistakes To Avoid Before a Bankruptcy Filing
If you’re thinking about filing for bankruptcy, you don’t want to make any mistakes that could jeopardize your case. Staying away from these typical blunders can help you avoid creditor and trustee problems and keep your bankruptcy case moving along smoothly:
- Moving money or property around
- Paying back some credits and not others
- Purchasing nonessential items with credit
- Making unusual deposits in your bank account
- Bringing frivolous lawsuits
What Happens During Preparation for Chapter 13 Bankruptcy?
If you’re having financial difficulties, bankruptcy allows you to pay off a portion of your debts over time or have some of them forgiven totally. There are certain steps that occur during your bankruptcy preparation leading up to and after the actual filing.
- A petition for Chapter 13 bankruptcy is filed.
- As soon as the petition is filed, an automatic stay goes into effect.
- A trustee is appointed to your case.
- The court sends notice of Chapter 13 case to you and your creditors a few days after the filing.
- Your creditors can file objections if they choose.
- You’ll need to give your trustee a copy of your tax return no more than 7 days before the initial meeting of your creditors. Black out personal information like social security numbers.
- If your plan is approved, you’ll start making payments within 30 days of your filing. If your plan is not approved, any money you pay is refunded, minus any court costs, by the trustee.
- Your creditors meet within 40 days of your petition filing. Make sure you attend.
- If needed, a modified plan can be filed. Your creditors are allowed 20 days advance notice of any changes to your plan.
- Typically, 20 to 45 days after the meeting of creditors, a confirmation hearing happens. Make sure you or your attorney attend.
- Creditors have 90 or 180 days to file proofs of claim to show how much you owe them.
- If needed, 30 days prior to an objections hearing, objections claims must be filed.
- Usually twice a year, the trustee sends you statements about which creditors filed claims and for how much. As well as how much you’ve paid each creditor and your remaining balance.
- Each year plan is in effect, you’ll submit income and expense statements as required.
- Prior to your plast plan payment, you’’ file proof that you completed a financial management course.
- Upon successful completion of your repayment plan, the courts grant a discharge.
How To List Debt in Preparation for Bankruptcy
Because your creditors must be notified of your bankruptcy, the best approach to ensure that you get a discharge is to list all of your debts on your bankruptcy documents.
To do this, gather all of your bills and get a copy of your credit report before filing. Then double-check everything. Also, make a note of any loans that will not appear on your credit reports, such as a loan from family or friends or a personal guarantee.
If you discover that you omitted a creditor by mistake and your bankruptcy is not completed, revise your schedule to include it.
Even if you don’t anticipate your debts will be wiped out by your discharge, you must mention all of them on your bankruptcy schedules. You face the danger of remaining liable for a debt if you ignore it. This includes credit card debt, vehicle loans, and mortgage debt.
Bankruptcy Document Preparation Services
Outside of a lawyer or someone who works for a lawyer, a bankruptcy document preparation service is any person or organization that charges a fee to create bankruptcy filings. They create bankruptcy forms for you to file, either by typing them or inputting information into a bankruptcy software program, under your direction and supervision. Since they’re not attorneys, they can’t provide you with any advice on your bankruptcy petition.
So, if you utilize this type of service it’s important that you understand which are discharged by your bankruptcy, what will happen to your property, and what laws to use to protect your property from being confiscated.
You also must file the bankruptcy papers in court yourself and represent yourself in court. The responsibility for your case is yours.
Contact the Louisville Chapter 13 Bankruptcy Attorneys at O’Bryan Law Offices
The laws may have changed a little, but bankruptcy still helps you get out of debt. With the help of the Kentucky bankruptcy attorneys at O’Bryan Law Offices, you can get a fresh start on your finances. Call 502-400-4020 to schedule a no-cost, no-obligation consultation. Our firm can assess your position, go over your alternatives, and offer the best financial approach for you.