Are you planning to file for bankruptcy? If so, managing your debt and assets before you even begin is important for the success of your claim. Here are a few do's and don'ts involving your money in the weeks and even months before filing with the court.
Do Buy What You Need
Bankruptcy court will go over your financial transactions leading up to your filing date to look for prohibited actions. But the court also understands that you have to continue to live and that you're most likely making the best choices you can. So don't skip out on necessary things. Get your health cared for, buy food and supplies, fix your car, and keep your dishwasher running.
Don't Buy Luxuries
The types of transactions that could put your claim in jeopardy are luxury items. These go above and beyond the reasonable needs of a family. It may include a big vacation, new vehicles, remodeling functional parts of your home, or a makeover. Before buying anything, think about how you would explain it to an actual bankruptcy court judge.
Do Prioritize Some Debts
Some people who struggle on their own end up focusing on the wrong debts. While your credit card issuer may harass you, this is a dischargeable debt in bankruptcy. But the silent danger could be your unpaid property taxes or income taxes that put your home or livelihood at risk. Reasonable actions with the money you have available are unlikely to be penalized by a judge.
Don't Prioritize the Wrong Debts
At the same time you prioritize the right debt, avoid prioritizing the wrong ones. This may include dischargeable debt that will be handled by the bankruptcy filing. But if you prioritize debts for nonfinancial reasons — such as money owed to a friend or family member — this money may be demanded back by the court later on.
Do Engage In Legitimate Transactions
Most future bankruptcy claimants are advised to engage in little or no financial activity. In fact, you can still engage in legitimate and necessary transactions. If you have an asset to sell and want to do so now, you may do it as long as you get its actual (market) value in return. Just avoid transactions that may look suspect, including donations and 'sweetheart' deals.
Don't Try to Hide Things
Above all, fight the temptation to try to hide anything from the bankruptcy court. Remember that the court can do their own investigations, including getting records from banks, brokerage firms, and your employer. Even the appearance that you're trying to skirt the rules could see your entire case dismissed.
As you follow these do's and don'ts leading up to your claim, your case will be stronger and simpler. Want to learn more about your own particular circumstances? Start by meeting with an experienced bankruptcy attorney in your state today.
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