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How to prepare for bankruptcy

Bankruptcy is considered a new beginning for many people.

Bankruptcy is mentioned prominently in the Constitution. Article 1, Section 8, Clause 4 of the United States Constitution states:


Congress shall have the power to … establish … uniform bankruptcy laws throughout the United States …

Bankruptcy is a necessary option for those with a high debt-to-income ratio. However, it has serious consequences. Your credit will be ruined for up to 10 years, the process will cost you at least $ 1 to $ 2,000 to file, and the lenders will be very tired of you. As a bankruptcy paralegal, I would not recommend that anyone file for bankruptcy if they have less than $ 10,000 of debt. Debts can be paid, negotiated, etc. Without destroying your credit report! However, if you find yourself in the middle of foreclosure or just can’t see a predictable way to escape, bankruptcy might be your best option. If you are considering this option, consider these 10 strategies.

  1. Pass the “Means test”: If you are single and earn less than $ 40,000 per year, you will most likely qualify for Chapter 7 bankruptcy. If you are married and your combined income is less than $ 80,000 per year, you will most likely qualify. Some couples will strategically file for separation during bankruptcy to reduce their household income, however, the bankruptcy administrator will investigate your living situation to make sure it is a legitimate separation.

  2. Replacement orders they are often necessary to recover property from a debtor, requiring the creditor to take you to court. Small items like toasters, televisions, or anything worth less than $ 1,000 can often be seized if the debtor is brave enough to mislead the creditor. Replenishment orders cost time and money. In my years working as a bankruptcy paralegal, it is extremely rare to see a creditor request a Replevin order on any item worth less than a grand.
  3. Credit scores can be strengthened after bankruptcy if you get a secured credit card and pay it off quickly after making small purchases.

  4. Don’t purposely accumulate debt on entertainment (non-essential) items and then immediately file bankruptcy. Most debts less than 90 days old are generally reviewed and are considered “fraudulent” debts in many bankruptcy cases.

  5. Chapter 13 bankruptcies will prevent your home from being repossessed, however, it will only buy you a few months. If you don’t make your Chapter 13 plan payments, the foreclosure process starts all over again.

  6. Chapter 7 bankruptcies will not eliminate mortgages or auto loans. Expect to return those properties after your case has been completed, unless you enter into a “reaffirmation agreement.”

  7. Negotiate your reaffirmation agreement with your attorney or better yet, try to avoid signing one! See if the creditor will continue to receive payments at the same rate as before. Often times, creditors will try to get you to enter into a new higher rate agreement to benefit.

  8. Child support is a non-dischargeable debt. However, filing for Chapter 13 bankruptcy can help you reorganize your child support debt and avoid having your driver’s license suspended.

  9. Student loans and tax debt owed are generally considered non-dischargeable. In some rare circumstances, they can be discharged.

  10. Show up in court! If you don’t get a notice in the mail from your attorney, give them a call! Missing your court date can cause long delays and possibly your case dismissed. It is imperative that before filing for bankruptcy, you save some time off from your employer. The judge doesn’t care about your excuses. If you do not show up, attorneys, paralegals, and the courts have to work hard to get a new hearing date. Your attorney and the paralegals who assist you will no doubt thank you for making their job so much easier!

These are just some basic tips when it comes to filing for Chapter 7 and Chapter 13 bankruptcy. If you have any additional questions. Feel free to contact me at [email protected]

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