Taking the Right Steps in Preparation for Bankruptcy

Things You Do and Don’t Want to Do before Filing for Protection

There’s an erroneous perception that bankruptcy is a bad thing, that it’s a sign of failure or irresponsibility, that it’s going to ruin you financially for the rest of your life. Those sentiments typically come from people who’ve never had an unexpected injury or illness, never lost a job or never gone through a divorce. The reality—the bankruptcy laws were enacted to give ordinary, hard-working folks the opportunity to get a fresh start when life confronts them with insurmountable challenges. Furthermore, filing for bankruptcy is almost always viewed by potential creditors as better than letting your situation continue to deteriorate.

If you’ve concluded that bankruptcy is your best way forward, there are some things you want to do before you file. There are also some actions you need to avoid.

The Right Steps to Take before Filing for Bankruptcy

• To get the most out of a bankruptcy petition, be as thorough and organized as possible. Get yourself an accordion folder and pull together any documents you have related to income, debts and property. That will help you complete the requirements of the means test, if you want to permanently discharge debts, and it will help ensure that you get relief from all qualified debt.
• Limit your spending to essentials, such as food, shelter, gas and utilities. Any purchases made immediately before a petition will be scrutinized. If they are considered luxuries, you may not get any relief from repaying them.
• Change your phone number—There’s nothing in the law to prevent this. When you file for protection, your creditors will be legally compelled to stop calling you, but they may do so anyway.

Things You Don’t Want to Do before Bankruptcy

• Don’t make preferential payments—If you pay off family members or other preferred creditors, but not others, those payments can be recalled
• Don’t give property to family or friends—This may be deemed bankruptcy fraud. You can sell property to friends or family at fair market value, with the hope of buying it back from them when your bankruptcy is over.
• Don’t pay debts with retirement funds—Retirement accounts are protected from creditors in bankruptcy. Don’t waste those assets.
• Don’t use your credit cards—Though credit card debt can be discharged, the court may deny that request if it looks you intentionally ran up credit cards, knowing you would discharge the debt

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

Named a New Jersey SuperLawyer Every Year since 2008, Including 2022