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Steps to Take to Prepare for Bankruptcy

Aug. 12, 2021

A money bag lays on top of a bankruptcy formFiling for Chapter 7 or Chapter 13 bankruptcy is never an easy decision; however, it may be the best path to take if you have fallen far behind on making payments on your credit cards, mortgage, auto loan, or other debts. Filing for bankruptcy might give you a fresh financial start and reduce your stress.

At Sam Thomas III, ESQ. LLC, we have the experience and resources you need. We can help you understand how bankruptcy works, prepare you for filing, and be with you during the entire process. You will have to make many decisions if you file for bankruptcy. Your first should be retaining a bankruptcy attorney who can help you navigate the process successfully.

We have guided many people, like you, through bankruptcy in Shaker Heights, Ohio, Cleveland, and throughout northeast Ohio, including Akron, Canton, and Youngstown. Call for a free consultation.

What Should I Do to
Prepare for Bankruptcy?

There are 4 key steps you should take to get ready to file for bankruptcy:

Make Sure You Have Filed Your Tax Returns

You need to have filed your income taxes in the two years before you file for bankruptcy. Most of the time, what you owe in income taxes cannot be taken away in bankruptcy, so you need to pay them. If you are getting an income tax refund, you want it to come to you and not have that money used by the court.

Pay Off Necessary Bills

You must continue your child support and alimony obligations. Bankruptcy will not discharge those payments so you should keep making them. You also need to pay insurance premiums on your home and car and if you want to keep them, continue to make mortgage and loan payments. You should also keep paying utility bills. Some utility bills you owe may be discharged in bankruptcy but not all of them.

Stop Automatic Payments

Many people have payments for certain bills taken out of their bank accounts every month automatically. To prepare for bankruptcy, you should stop automatic payments to take control of what you pay and when you pay it. Your lawyer can help you with this.

Document Debt Information
Honestly and Thoroughly

Under penalty of perjury, which means telling a lie when you swear not to, you must tell the court about everything you own, all the bills you have to pay, and all the money you make from your job or other sources of income. If you do not tell the court about money you owe, even accidentally, the court will not be able to discharge or reduce that amount owed and you will have to pay it yourself. You must take time and be careful when making a list of this information, so you do not forget something.

What Should I Not Do
Before Filing for Bankruptcy?

There are several important things you should not do before filing for bankruptcy:

Do Not Pay Debts that Would Be Dischargeable
or Use Assets that Would Be Protected

If a debt is dischargeable in bankruptcy, you should stop paying them and use that money to pay debts that cannot be discharged. You should also avoid using assets that may be protected under bankruptcy, such as your home, to pay other debts. What you can discharge in Chapter 7 and Chapter 13 bankruptcy often varies, so discuss this with your attorney.

Do Not Wait until Someone You
Owe Money to Takes You to Court

When someone you owe money to takes you to court and the judge orders you to pay them, they can take money out of your paycheck (“garnishment”) or assert a lien on something you own like your house or car. Most garnishments and liens are not addressed in bankruptcy so you would still owe that money.

Do Not Use Retirement Accounts to Pay Debts

Most of the time, you can protect your retirement account when you file for bankruptcy. Do not cash it in before filing your case in court.

Do Not Acquire New Debt

For at least three months before filing for bankruptcy, you should not spend money on things you don’t need and not spend all the credit you have on your credit cards. You could be charged with a crime and be held responsible for paying back all that money.

Do Not Move Assets

“Assets” are things you own that are worth money, like a house or car, a savings account, or a valuable piece of art. If you try to hide these things from the court, you could be charged with a crime. Sometimes, people sell something they own to pay a bill, child support, or even to buy groceries. If you do, you must make sure you keep all receipts of what you sold and what you used that money for. It is best to talk to your lawyer before selling anything you own.

Do Not Pay Money You Owe to Someone
You Know Instead of Paying Other Bills

If you owe a family member or friend money they gave you as a loan, paying them back before you pay back others you owe can get you into trouble. The judge could order your family member or friend to return the money to the court.

Get the Experienced
Guidance You Need!

What you should do and what you should avoid before filing for bankruptcy can be confusing. Making mistakes can prohibit some of the relief you could have otherwise obtained through bankruptcy. Other mistakes can get you in trouble with the court. It is important that you consult with an experienced bankruptcy attorney as soon as you begin considering bankruptcy as an option.

Your attorney can help you gather financial information, assess it, and give you guidance. They can help you explore the type of bankruptcy you should file or whether you should file for bankruptcy at all.

If you do file, your lawyer will help you with all the papers you need to fill out and will file them with the court. Your lawyer will also be with you in court to help answer questions the judge might ask. You do not need to go through this alone. Sam Thomas III, ESQ. LLC can help.

We have assisted dozens of clients in Shaker Heights, Ohio, Cleveland, and throughout northeast Ohio, including Akron, Canton, and Youngstown prepare for and get through bankruptcy. If you are ready to rid yourself of the burden of overwhelming debt, call our office today. We can help, but you need to take the first step. Call now.