If you have decided to file for bankruptcy, it pays to do
some prebankruptcy planning before you take the plunge. With some forethought,
you can help the process go more smoothly, anticipate and fix problems, and determine
the best time to file.
If you are married and considering bankruptcy, you'll have to decide whether to file separately (that is, only one spouse files for bankruptcy and the other is not part of the case) or jointly (both spouses file together).
In Chapter 7 bankruptcy, the trustee has the right to take back property or money that the debtor improperly gave away before filing. "Clawback" is the term used to describe this power, which allows the trustee to regain assets should have been part of the debtor's bankruptcy estate, but were removed or hidden from the trustee by the debtor by means of preferential or fraudulent transfers.
In bankruptcy, a preference payment occurs when you repay a creditor within a certain period of time before you file for bankruptcy. If you make a preference payment (also called a preferential transfer), your bankruptcy trustee may be able to get the money back from the person or business you paid – called “avoiding” the transfer.
If you receive an inheritance after filing for bankruptcy, it might become part of your bankruptcy estate. In a Chapter 7 case, this means the trustee can take the inheritance unless it's protected by an exemption. In a Chapter 13 case, receiving an inheritance could increase the amount you have to repay to your creditors.
Sometimes it’s a good idea to delay filing for bankruptcy. For instance, waiting for your income to drop might help you qualify for Chapter 7. It’s also a good idea to wait until you finalize a mortgage modification. On the other hand, you’ll want to avoid some transactions altogether before filing for bankruptcy. For instance, charging purchases, paying relatives, and transferring property before filing for bankruptcy can wind up costing you money.
Is bankruptcy the right solution for your overwhelming debts? Pick the best strategies for your situation with the information and practical suggestions in this book by best-selling author Stephen Elias.