Recently on our bankruptcy forum a user asked, “I have come to the conclusion that after a massive surgery and losing my job that I will not be able to pull myself out of my financial crisis without filing for bankruptcy protection. With this in mind, I am wondering what I need to do before filing bankruptcy?”
Unfortunately, many Americans face devastating situations which send them into a financial tailspin. Some choices may be of our own making; others are not. Regardless of the reason, if you have considered all of your alternatives and you have decided that filing bankruptcy is your only choice, you need to take the right steps to ensure financial solvency.
Steps before filing for bankruptcy protection
- Talk to a financial professional.
If you are considering filing for bankruptcy protection the first step is to talk to a financial advisor. This advisor can be a bankruptcy lawyer or it could be another professional who can analyze your financial situation and help you determine if you have any other options.
- Stop using your credit cards
Assuming you have made the decision to file for bankruptcy protection, it is import to stop using your credit cards. In some cases, borrowing money within a specified time prior to filing bankruptcy with no intention of ever repaying the money can be considered fraud.
This includes monies you receive from friends and family which the creditor intends as a loan. Any money you get from friends and family must clearly be given as a gift and not a loan.
- Take steps to postpone a foreclosure.
A home provides both emotional and physical benefits. If your mortgage lender is threatening to foreclose on your home it’s important to take steps to postpone or delay this process. The first step is to contact your lender. Tell them exactly why you are unable to meet your financial obligations. Most lending companies do not want your house, and they may be willing to negotiate some type of repayment plan or help you finance the loan.
- Stop paying certain bills
Although you will need to continue to pay your car payment, utility bills, health insurance premiums and other secured loans before filing for bankruptcy, unsecured debts may be delayed, especially if you are going to potentially receive a discharge of these bills through Chapter 7 bankruptcy.
It is important, however, before filing for bankruptcy that you also talk to your lawyer about your options and make sure you do not pay any one creditor a total of $600.00 or more within the three months prior to filing bankruptcy. You also should not repay your friends or family members who made unsecured loans to you or transfer any assets in an attempt to hide or shield them from the bankruptcy court.
- Reassess your spending and take steps to rebuild your life
Prior to bankruptcy you will also need to reassess your budget. Review your income and expenses, potentially get a second job, or consider living on a cash only basis. Yes, you might have to drop your gym membership or skip that Starbucks coffee each morning, but you will be better prepared to live within your means going forward.
Bottom Line before filing for bankruptcy
Filing bankruptcy is a tough choice that should only be made after considering all of your options. If it is your only choice, however, it’s important to take the right steps BEFORE you file.
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