5 Tips When Considering Bankruptcy

Bankruptcy is usually not a decision made overnight. Many struggle with working with their creditors for months if not years before considering bankruptcy. Others may have financial difficulties that arise suddenly such as after an accident or illness. If considering bankruptcy, keep these tips in mind.

First, do not throw out any financial documents. Bankruptcy attorneys need it all including the last six months of income statements, four months of bank statements and four years of tax returns for those required to file taxes.

Second, most people can protect most, if not all, of their assets in bankruptcy including their home and car. But, there are limits on each category which vary whether federal or state exemptions are used and the amounts change over time.

Third, most unsecured debt can be discharged in bankruptcy including credit cards, medical bills, personal loans, and the deficiency from a repossessed vehicle. It is also possible to choose to surrender a vehicle or real estate and discharge that debt as well. There are exceptions to discharge of these debts; however, frequently dependent on how and when the debt was incurred.

Fourth, when meeting with the bankruptcy attorney be completely honest. As noted above, there are circumstances which can make a typically dischargeable debt nondischargeable.  Also, if the first time the attorney hears about an asset it is from the bankruptcy trustee assigned to the case, then there is a chance that asset will not be protected in bankruptcy. If a Chapter 7 was filed, dismissing the case does not protect that newly identified nonexempt asset.

Finally, the decision to file is always the individual’s. Completing a bankruptcy consultation is not an obligation to file, it is only a discussion of the options available on that day.

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