Bankruptcy is a legitimate way for decent people to get a fresh start after financial trouble. It is not as easy as going to the courthouse, filling out a petition and filing it. You are not home free and absolved after doing that. Bankruptcy is a more complex legal proceeding. There are a number of things you must do before the process is completed. Here are five things you have to do when you need to file bankruptcy.
Find a Bankruptcy Attorney
You have to find a bankruptcy lawyer. The law is complicated, and filing properly and making court appearances are part of the red tape you will have to deal with. A bankruptcy lawyer has a lot of work to do on your behalf, and they have to deal with creditors and paperwork to make sure your bankruptcy is legal and worth filing. They also make sure your rights and self-interests are protected during the process from filing to completion. According to the Law Office of Barbara B. Braziel, the most important thing is having a knowledgeable professional who specializes in bankruptcy represent you.
Gather Your Bills and Make a List of Creditors
You are required by law to fully disclose your financial situation during a bankruptcy. In order to fully disclose your information to the court, you will have to supply your attorney with every bill your have. Additionally, your attorney will need your credit report. In addition to this being legal red tape, if a creditor is preparing to garnish wages or levy your accounts, your lawyer has ways to prevent the actions.
Cease Using Credit
The court goes back between two and three months to make sure you have not tacked on new debt since filing, so it is considered highly unethical to keep borrowing money you cannot pay back. The only gray area is payday loan cycles for essentials. If you are stuck in a cycle, ask your lawyer for assistance.
Stop Paying Unsecured Creditors
Bankruptcy court is meticulous about going through your financial records, so stop making payments to creditors holding unsecured debt because it will be absorbed by the bankruptcy.
Definitely avoid making any payments over $1000, especially to a friend or family member. The court will go back three months for traditional creditors, but they go back a full year to check for personal loans made by friends or relatives. If you do not, the bankruptcy can be contested.
Determine Your Timeline
The court looks at and considers every single bit of your financial activity six months prior to filing for the bankruptcy. Any unusual bank account activity is going to be heavily scrutinized. This usually entails holding money for other people. Cease the activity right away. If your timeline is not up to court standard, ask your lawyer how to fix it.
Bankruptcy is more complicated than people realize. Because of all the red tape and heavy scrutiny, it should be used as a last resort. Filing for bankruptcy with improper account activity that violates the red tape procedures can lead to a rejection in your petition and possibly worse.
About the Author: Lizzie Weakley is a freelance writer from Columbus, Ohio. She went to college at The Ohio State University where she studied communications. In her free time, she enjoys the outdoors and long walks in the park with her husky Snowball. You can find her on Twitter at @LizzieWeakley and on Facebook at facebook.com/lizzie.weakley.