You can free yourself from burdensome debt by filing for Chapter 7 bankruptcy. However, you must comply with all of the rules and regulations associated with filing for bankruptcy. If you fail to follow all of the rules, your case may be dismissed. You could also face time in a federal prison if you intentionally misrepresent the state of your finances. Preparation and truthfulness are the keys to a successful discharge of your debts. While your attorney will file all of the necessary paperwork and guide you through the process, the attorney can only work with the information provided, so you must provide accurate and truthful information. Here are a few actions that you should perform, as well as those that you should avoid, for success in your Chapter 7 bankruptcy case.
The Dos of Filing for Chapter 7 Bankruptcy
You must earn less than the current median income for your state to qualify for Chapter 7 bankruptcy. Your current monthly income will be determined by averaging the last six months of your gross wages, but will also include your spouse's income or that of anyone else who contributes to your daily expenses. This monthly total will then be multiplied by 12 to determine your current annual income.
If the primary reason for your dire financial straits is a recent job loss, your monthly income averaged over the previous six months may far exceed your actual current income and push you over the state median. You will then be forced to file for Chapter 13 bankruptcy, which involves a structured repayment plan to your creditors. You should wait a few months before filing to lower your average monthly income to its true value so you can qualify for Chapter 7.
If you are financing a home or vehicle and wish to keep it by reaffirming the loan, your payments must be up to date. Unless you are facing foreclosure or repossession and require the immediate benefits of an automatic stay, which halts all collection efforts by creditors, you should direct your remaining resources toward catching up on any late payments before attempting to file for Chapter 7 bankruptcy.
You should get your home appraised by a professional bankruptcy appraiser unless you are certain of the value of your home and have documentation to substantiate it. You will then be sure that any equity in your home doesn't exceed the homestead exemption allowed by your state.You can use free appraisal tools on popular auto websites to determine the value of your vehicle, but don't use the trade-in value. You must use the private sale value provided to determine the actual replacement value.
The Dont's of Filing for Chapter 7 Bankruptcy
Don't try to hide or sell assets or transfer them to family members in order to protect them from seizure and liquidation for repayment to creditors. Assets may include real property (homes or land), personal property or liquid assets such as cash. You must be forthcoming about all of your financial transactions and assets before filing because attempts at deception or hiding of assets can doom a bankruptcy case.
Don't charge expensive items or take large cash advances shortly before filing for bankruptcy in anticipation of having the debts discharged. Normal use of credit is accepted, but if the use of credit is excessive and unusual, your case may be dismissed or the recent debts exempted from discharge — requiring repayment.
Don't give preferential treatment to any single creditor before filing for bankruptcy, especially family members or friends to who you own money. Allow the debt to be discharged in bankruptcy so you can repay the debt as you wish.
As you can see, bankruptcy law can be confusing and a false step can bring disaster to your case and the life that you're trying to rebuild. Contact the Law Office of Cowan & Brady to schedule a free consultation with an experienced attorney.