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Filing Issues to Consider when Pre-Bankruptcy Planning

Filing for Chapter 7 or Chapter 13 bankruptcy is a big step. However, if handled correctly, it can mean a fresh financial start for you. With some careful planning before you file, you may be able to protect some of your assets. The bankruptcy attorneys at Morgan & Morgan have been advising Northeast Georgia residents for decades as they prepare for bankruptcy and representing them as they go through the process.

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Exempt Property in Chapter 7 and Chapter 13 Bankruptcy

One of people’s primary questions as they prepare for bankruptcy is how they can legally protect as much of their money and property as possible from creditors. A word that you will hear a lot in filing for bankruptcy is “exempt.” Whether money or property is exempt from creditors depends in part on which type of bankruptcy you file.

Chapter 7: In this type of bankruptcy, also known as “straight bankruptcy,” a trustee is appointed to liquidate the debtors’ assets and use the proceeds to pay off creditors.

Chapter 13: If you are determined to have enough income to pay back your debtors over time, you may qualify to file this type of bankruptcy, also called “reorganization bankruptcy.”

In both types of bankruptcy, some property can be classified as exempt. If you file Chapter 7, exempt property can’t be liquidated by the trustee. If you file Chapter 13, exempt property is not included in the repayment plan.

Dos and Don’ts of Pre-Bankruptcy Planning

Most bankruptcy courts will look at any exchange or sale of money and assets and to whom they went. For example, if you pay back debts owed to friends and relatives, these are considered “preferential transfers,” and the trustee can sue them to get the money.

Some financial will freeze people’s accounts once a person files for bankruptcy. If you have a deposit account at the same institution where you have a credit product (such as a loan or credit card), they can “set off” these debts via your other accounts. You should definitely seek the advice of an attorney before moving money to avoid these actions in order to help ensure that you are within the law.

There are steps you can take using non-exempt portions of your assets to pay down non-dischargeable debts (including student loans, taxes and child and spousal support). You may also buy essential property that is considered exempt. Your attorney can look at your individual situation and recommend some potential steps to take before you file.

If you are considering filing for bankruptcy, call or contact us online to schedule a free consultation. Our experienced bankruptcy attorneys can help guide you through the process to do everything possible to minimize the impact of bankruptcy on you and your loved ones and to get you back on track to a healthy financial future.

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