I hope this is a useful guide for anyone considering filing. This is general advice, and for SPECIFIC legal advice, talk to a lawyer. That being said, if this helps prevent a future catastrophe for you and your family, that makes me happy!
Financial Moves to Avoid Before Filing Bankruptcy
- DO NOT Pay back friends of family money owed. Corollary: don’t pay unsecured creditors back, or single out a card – it’s often a waste of money.
- DO NOT Transfer property out of your name, including bank accounts, houses.
- DO NOT Incur a bunch of debt knowing you won’t pay it back (gambling included!).
Talk to a lawyer if you have an impulse to do this!
Secure Your Rental Housing Before Filing Bankruptcy
RENTERS: It’s typically much easier in my jurisdictions (MI and CO) to get a place before you file than after, and very tough during the process. Secure your housing before you file, and make sure you have a plan B.
Facing Foreclosure? Talk to a Lawyer Before It Happens
Foreclosure coming up?
- If you want to save your house, DO NOT wait until after the foreclosure to call a lawyer! Don’t give your house away to a cash investor who is paying less than the fair market value or a scam artist who offers to get you caught up in return for transferring the property into their name. I have seen this happen and it’s heartbreaking.
Understand the Risks of Debt Settlement Companies
Debt settlement companies are mostly a scam. You can read the posts in here about them, but the agreement you make is between you and them, and not binding with your creditors. They can still sue you, add late charges, interest. If you have 80% of the cash to settle in a bank account, call a lawyer to settle your debt.
Disclose Legal Claims, Assets, and Income in Bankruptcy
If you have the right to sue someone for any reason, class action, personal injury etc, let your lawyer know right away so it can be listed in your schedules. Leaving it out could be bad – look at ‘Judicial Estoppel’.
NEVER hide assets or income. This includes side cash jobs.
Make sure your tax documents match your bankruptcy documents.
Compare the Cost of Repaying Debt With the Credit Impact of Bankruptcy
Don’t mistake bad credit with the expense of paying your debts back. Far too often people outweigh the negative credit hit against the tens of thousands of dollars they will pay back to creditors by NOT filing. Use this calculator to determine the costs of not filing. This is a financial and business decision. Treat your creditors how they treat you!
Vehicle Costs and Wage Deductions in Chapter 13 Bankruptcy
With rare exception, vehicle-based Chapter 13s are a nightmare for everyone involved. With the higher interest rates, cost of insurance, ‘adequate protection’, if the vehicle was purchased sooner than 910 days ago, it’s almost always extremely expensive.
If you’re in a Chapter 13 and you have a wage deduction, make sure it is working every time you get paid. Expect that there may be a mistake on the part of your employer in terms of frequency or amount. Contact your lawyer if something is amiss!
Student Loans and Income Driven Repayment Credit in Chapter 13
Public student loans can now be credited in IDR plans through Chapter 13:
New Rule Gives Chapter 13 Bankruptcy Debtors Credit Toward Student Loan Forgiveness
Credit Unions, Payday Loans, and Major Financial Decisions
Additionally:
Credit Unions are not your friend, or your family, even if they call you ‘member’. They’re in it to make money.
Cash Advance/Payday Loans are satanic. Avoid them.
In general, don’t make any big money moves, buying, selling, moving stuff around. There may be exceptions to these statements, and for LEGAL ADVICE talk to a lawyer in your jurisdiction.
