4 Things You Absolutely Should Not Do When Filing Bankruptcy
TRI Writer • October 11, 2021
Are you having financial problems? If you are considering bankruptcy as an option, make sure you are aware of what NOT to do when filing bankruptcy. Certain actions (or inaction) could limit your options, or put you at risk of having your bankruptcy case dismissed, so consider this list of what not to do when filing bankruptcy.
4 Things You Absolutely Should NOT Do When Filing Bankruptcy:
- Do NOT transfer property or money. Transferring title to a property before you declare bankruptcy is not an option. Do not sell or transfer any property or assets to relatives or friends in an attempt to hide them from the bankruptcy court or “keep them out” of the bankruptcy. At the Meeting of the Creditors, the bankruptcy trustee will immediately ask about any transfers, and the trustee has the power to recover any assets that you transfer within a certain amount of time prior to filing. In addition, any creditor and the trustee may object to your discharge if the transfer was made with bad intentions and within 2 years of the date you file.
- Do NOT leave out any income when filling out your bankruptcy paperwork or speaking with your bankruptcy attorney. Some people assume that a second job or a part-time job doesn’t count as real income, but all income to the household must be included. The bankruptcy court handles bankruptcies all day long every day, and they know how to put together a story from the bankruptcy paperwork. The trustee will look back at least six months to determine a “normal” state for the household income. You must also list your spouse’s income unless you are legally separated. While the bankruptcy court cannot require that a spouse pay a debtor’s debts, they can require that a spouse contribute to a household. Anyone you claim as a dependent must also have their income listed, and while social security doesn’t count towards the income taken into consideration when qualifying for bankruptcy , it still needs to be included on your income schedules.
- Do NOT pay back your favorite creditors or any family/friends that may also qualify as a creditor. It’s not out of the norm for someone filing bankruptcy to have one or two “creditors” that they want to pay in full before they file bankruptcy, but the bankruptcy court doesn’t recognize “favorites.” The court is in charge of who gets paid and how much and rather than your “favorites” the bankruptcy court puts your secured creditors at the top of the list. (Secured creditors are paid first from any available funds in a bankruptcy, with any remaining funds divided equally amongst creditors). If you take it upon yourself to play favorites and pay certain debts before filing bankruptcy, the trustee may take back funds paid to family or friends within the year prior to filing.
- Do NOT create new debt without first discussing the matter with your attorney. In some instances, it may be a good idea to get a secured car loan prior to filing bankruptcy, but it is a bad idea to purchase any nonessential items on credit prior to filing. If you aren’t sure if an item is essential or not, ask your attorney. Not only will the trustee be the one to determine whether an item qualifies as essential or not, but creditors can object to major purchases made in the months before filing, and may even be able to file their own lawsuit asking the court not to discharge the portion of debt associated with the questionable or recent purchase.
If you need help filing bankruptcy , or if you have questions about how filing bankruptcy can help you and your family get a fresh financial start, call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.
The post 4 Things You Absolutely Should Not Do When Filing Bankruptcy appeared first on Kenneth C. Rannick, P.C..
Struggling with debt? Learn seven key signs that it might be time to consider bankruptcy. Kenneth C. Rannick P.C. offers legal guidance to individuals in Chattanooga ready for a financial fresh start.
Can I Keep My Car If I File for Chapter 7 Bankruptcy in Tennessee?
What Are My Options If I Am Drowning in Credit Card Debt in Tennessee?
What Are the Documents Required to Apply for Chapter 7 Bankruptcy in Tennessee?
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy in Tennessee?
Understanding Chapter 7 Bankruptcy Qualifications
Understanding the Role of the Trustee in Chapter 13 Bankruptcy
Understanding which Debts can be Discharged in Chapter 7 Bankruptcy
Protecting Your Assets in Chapter 7 Bankruptcy
Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses? In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.