Bankruptcy provides temporary relief for business owners and people dealing with debt. It allows a debtor enough time to reorganize his or her financial obligations or cut them completely. The process is extremely complicated and requires planning and legal advice. Additionally, bankruptcy carries some consequences, such as the required sale of non-exempt assets and a decreasing credit score. Before requesting bankruptcy protection, it’s best to consult a financial advisor or an attorney to determine the availability of alternatives.
What To Do Beforehand
Consumer and business bankruptcies need substantial forethought and planning. Before filing via NY-Bankruptcy.com, address these steps.
• Bankruptcy steps: First, decide which bankruptcy type applies to your situation. Most consumers file under Chapter 13 or Chapter 7. The latter allows for the cancellation of most debts, while the former requires adherence to a repayment plan. Each bankruptcy type has requirements and limitations that you should learn about before filing.
• The means test: Before receiving bankruptcy protection, you’ll need to take the means test. This complex calculation determines how capable you are of repaying your creditors while comparing your financial situation to that of others in your area. Depending on the means test’s results, you may not be able to file Chapter 7.
• Credit counseling: Next, you’ll undergo credit counseling. The bankruptcy code requires the completion of counseling before the process can continue, but thankfully, it can be done online.
• Gathering information: Finally, you’ll gather information about your financial status. Make a list of creditors and note whether they’re secured or unsecured. A secured creditor will have a mortgage or a lien on a piece of property, while an unsecured creditor will not. Every creditor must be notified when a person or business files for bankruptcy.
To start the process, a petition must be filed with the bankruptcy court, along with several forms outlining your financial standing. When filling out these forms, it’s crucial to accurately and honestly disclose all obligations and assets. Additionally, you’ll have to give an in-depth explanation of the reasons you’re filing. Most forms must be submitted within 14 days of filing, which means they should be completed before the petition is submitted.
Mistakes to Avoid Before Filing
There are a few things not to do before requesting bankruptcy protection.
• Don’t give away assets: Unless your attorney advises it, don’t give away cars, personal belongings, and other property. It could be considered a fraudulent transfer, and the court could reverse it if the asset is needed to repay creditors.
• Don’t overspend: Though it’s okay to buy the necessities, you shouldn’t go on a spending spree before filing for bankruptcy. The court could decide that you’re trying to use the process to defraud new creditors.
• Be honest. Don’t be ashamed to be truthful. If you have legal representation, don’t lie or hide anything from your attorney. If the lawyer doesn’t have the right facts, they won’t be able to form a defense if a creditor raises an unanticipated issue.
Is It Necessary to Hire an Attorney When Filing For Bankruptcy?
Because the requirements are so complicated, it’s best to hire a lawyer before initiating bankruptcy proceedings. An experienced attorney will help you file the necessary paperwork, meet deadlines, work with creditors, and offer courtroom representation.
