A 12-part Series On All You Need To Know About The Process of Filing for Chapter 7 Bankruptcy
Part Eight – Bankruptcy – Why You Should Act Fast be Organized and Accurate!!!
Filing for bankruptcy means you intend to open ALL (Yes, I mean all) your finances to the world. You will be providing documentation for all your assets including bank statements, last three years of tax filings, pay stubs and the like. It is likely that all these documents will have to be produced to the trustee. So be ready!
In bankruptcy timing is everything. It is extremely important for a debtor to act quickly and get all the required documents to their attorney. The faster this is done the faster the petition can be filed. There are several reasons why a debtor will want to act fast.
Let’s start with the Means Test. The Means Test looks at the debtor’s current monthly income based on an average of the past six months. If income is expected to grow, filing quickly to capture as much of the past low wages is important. As time goes on, that six-month time frame changes. So, if you are in January then the bankruptcy petition is looking at July through December. What happens if filing is delayed to February. Well, we are now looking at August through January. This change can take a debtor from qualifying for Chapter 7 Bankruptcy to being disqualified due to the income threshold. Same for assets. Some assets increase in value in time. Ultimately it means a new set of documents to disclose and a waste of time and energy.
Next, your creditors are not barred from moving forward with collection until your petition is filed. As soon as a bankruptcy case is filed, the automatic stay immediately goes into effect and generally prevents creditors from taking most actions against property of the bankruptcy estate, the debtor, and the debtor’s property. Until you file, creditors can file lawsuits, get judgments, and attach liens to property. Generally, although debts are discharged in bankruptcy, liens are not dissolved or stripped. That’s right, a lien could very well remain after you file bankruptcy and get your discharge. You want the automatic stay to kick in before anything like this happens. That means the bankruptcy needs to be filed.
The key to an efficient bankruptcy filing is to: 1. Quickly get all documents to your attorney; 2. Make sure you declare all your assets at the beginning of the process and don’t leave anything out; 3. Make sure you disclose any debts that are secured; 4. Make sure you are truthful and accurate about your income at the beginning of the bankruptcy process; 5. Make sure you list any asset your name is on whether it’s in your possession or you are paying for it or not; 6. Make sure you identify whether you own any real estate so we know which exemptions to use; and 7. Be honest because the Federal Bureau of Investigation will investigate bankruptcy fraud.