Many people hold the misconception that they will lose everything they own when filing for bankruptcy. Unfortunately, they may be tempted to take steps that in the long run can cost them dearly under the Bankruptcy Code. That’s why ethical and lawful bankruptcy planning can help protect your interests. So, what is pre-bankruptcy planning?
In an emergency situation, such as when a lender is seeking to foreclose on a home or repossess a car, there may be no time to wait before filing a bankruptcy petition. However, it may be better to create a legal and lawful plan of action to protect assets.
For instance, if you are expecting a large tax return or yearly bonus, it may be more beneficial to time your bankruptcy to protect assets. Similarly, far too many individuals try to delay filing for debt relief, relying on protected assets, such as a retirement account, to make ends meet each month.
Find Out Which of Your Debts Are Secured and Which Debts Are Unsecured
Secured debts are debts that are backed, or secured, by collateral. Your home and your car are examples of secured debts. Unsecured debts are not backed by collateral. Typically, credit cards and medical bills are unsecured debts. Secured debts are not discharged in Chapter 7 bankruptcy unless you decide to surrender the collateral, such as a vehicle or home. Most unsecured debts are dischargeable. The nature of your debts will have a great impact on the type of bankruptcy you file.
Take Inventory of Your Assets
This is helpful for a number of reasons. First, when filing bankruptcy, you are required to fully disclose your assets and liabilities. Taking inventory of what you own will help in this regard. Secondly and more importantly, certain classes of assets cannot be taken from you to satisfy your creditors. If you understand which of your assets are exempt and which are not exempt, you will have a greater understanding as to which type of bankruptcy is in your best interests.
Continue to Make Contributions to Your 401(k), IRA, or Other Pension Plans
These assets are generally exempt from bankruptcy with certain exceptions. Therefore, in most instances, any money you place in these accounts cannot be taken by the bankruptcy trustee.
Start Your Pre-bankruptcy Planning Now
The earlier you plan for bankruptcy, the more options you will have. The more options you have, the more leverage you will have with your creditors. Planning for bankruptcy includes hiring a lawyer. Our law firm can provide invaluable counsel during this time.
At Minnillo Law Group Co., LPA, we understand that bankruptcy is a major step in your life. Since 1996, thousands of clients have placed their trust in our law firm. With this level of experience, we know that proper planning for bankruptcy can protect your assets and maximize your debt relief.
We are a law firm and a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.