Finance

Crucial Things You Need to Know Before Filing for Bankruptcy

Sometimes, your payday is the least enjoyable day of the month. As you open your paycheck, you realize that it will barely cover your major payments. Mortgage costs, rent, car payment, insurance and other bills can quickly chip away at your paycheck. With so many costs, saving money seems like an impossible dream.

Some people have to file for bankruptcy before divorce to save money, or due to overextending their credit. Other people run into problems because of extensive medical expenses or unemployment.

You cannot always control things like medical bills or a layoff, but you can prepare in advance. Before you file for bankruptcy, make sure that you prepare by learning as much as possible about the process.

Filing for bankruptcy may be your only way to get out of debt or restructure your loans. It is a viable way to contain relief, but there are some things that you should know in advance. When filing for bankruptcy, you must follow the rules, so you need to educate yourself about the process before you file.

Do Not Cash Out Your Savings

Once you realize that you will be filing for bankruptcy, you may be tempted to cash out your savings. Some people do this to hide money from their creditors or bankruptcy trustee.

Unfortunately, this is a tricky situation, and it can be handled different ways. If you are caught trying to cash out your savings, you could face criminal charges. If you are convicted, you will have to deal with financial ruin and a prison sentence. The courts may let you keep a part of your savings anyway, so do not risk your freedom for extra assets.

Be Careful About Transferring Money or Assets

Filing for bankruptcy can be terrifying. Many people are terrified that they will lose everything that they have. Because of this, they panic and transfer their assets to other people. While this might temporarily save the assets from the bankruptcy process, it will not work for long.

You have to provide information about your current or expected assets when you file for bankruptcy. If you try to hide these assets in any way, you are breaking the law. As a result, your bankruptcy filing may be denied. Even worse, you could face criminal penalties.

Keep Paying Your Student Loans

While the student loan bubble remains a concern, you are probably stuck with your student debt. One of the reasons many people file bankruptcy is because of student loan debt, credit card debt, and other financial burdens.

Unfortunately, filing probably will not help you pay off your student loans. In only certain situations can student loans be discharged during bankruptcy.

Luckily, there are some options available. You can use educational portals at your bank’s websites to see how bankruptcy will affect your financial situation. You can also look into refinancing your student debts, getting a forbearance or deferment, or using an income-based repayment plan.

Watch Out Before You Pay Off Creditors

Bankruptcy experts typically recommend that you do not pay back your creditors within 90 days after you file for a bankruptcy. If you can avoid doing this, you could be eligible to get a preferential transfer.

This basically means that the trustee in charge of your bankruptcy can use your preferential transfer to get money back from creditors you paid before you filed for bankruptcy.

Get Help

Most people are not legal experts, and there are many rules about how bankruptcies work–who qualifies and which assets are affected. If you want to learn more about the process, consult a lawyer. Lawyers can help you learn how to apply for a bankruptcy and navigate the bureaucratic system.

Do Not Get More Debt

If you expect bankruptcy in the near future, then you should not get any type of debt. Do not get a new credit card, car loan, or any kind of loan within 70 to 90 days of filing for bankruptcy. If you get a loan in this time frame, your creditor can object to your loan request.

Basically, they can rightfully argue that they would not have approved of a loan if they knew that you were never going to pay it back. You can work on getting loans and rebuilding your credit after bankruptcy. Before it happens, make sure to avoid any new debts.

Determine the Right Time

Delaying filing for bankruptcy might be a mistake. If you have determined that you need to file for bankruptcy, your next step is to decide on when you should do it.

There are some cases where you may need to wait. In most instances, you will encounter more problems if you delay your filing. The most important thing is to do your research and ask questions before you make any life-changing decisions.

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