Bankruptcy Overview

When Bankruptcy May Be the Best Solution

Bankruptcy can be a clear and effective legal solution when bills become overwhelming: Bankruptcy allows you to either wipe out or reduce your debt (Chapter 7); or to repay part of your debt over time while keeping your property (Chapter 13). In order for bankruptcy to offer any meaningful benefit, it must give you freedom from creditor collection efforts. As a result, the Bankruptcy Code puts an immediate stop to just about everything a creditor can do to you, as of the time your case is filed through an “automatic stay” or freeze on all collection attempts. This includes lawsuits, foreclosures, garnishment of wages, attachment of bank accounts or other assets, car repossession, enforcement of judgments, evictions, collection letters, phone calls or e-mails. There are a few exceptions to the automatic stay, but for the most part your creditors have to leave you alone.

A Few Do’s And Don’ts

Bankruptcy represents a rare opportunity to wipe out your debts while enjoying the protection of federal law. In order to make the most of this opportunity, however, it’s essential to understand what’s expected of you in bankruptcy in order to avoid mistakes that could result in dismissal or denial of your discharge.

Here are some suggestions to keep your case error-free and help you navigate successfully through the process:

• Get your financial records organized before you meet with your lawyer. You have to give the bankruptcy court accurate schedules of debts, assets, income and expenses. The better your records are, the more complete your bankruptcy relief will likely be.
• If you’re thinking about filing for bankruptcy soon, be careful about what debts you’re paying and incurring. Don’t run up your credit cards. Don’t repay relatives or business partners. This can derail your case. Your transactions in the 90 day period before you file are particularly scrutinized for signs of abuse, fraud or preferential treatment of creditors.
• Don’t transfer property out of your name unless it’s an arm’s-length sale for fair value.
• Don’t give your car to your uncle to keep it away from your creditors.
• Be open with your attorney. Your attorney’s ability to help you will depend on having complete and accurate information about your financial situation.