The information below contains some helpful tips on what to do if you are considering filing bankruptcy. The most important thing you can do is contact a lawyer for help before filing any bankruptcy. Know what property you can keep and how to handle paying creditors prior to filing your case. These tips can be useful for anyone considering filing bankruptcy.
What To Do With Your Stimulus Check While Considering Bankruptcy
Already Filed Bankruptcy?
#1. If you have recently filed for bankruptcy, you may be expecting a stimulus check or may have already received yours. The US Trustee’s Office has put out a memorandum to all chapter 7 trustees telling them that they should not administer stimulus checks as a bankruptcy asset. However, keep in mind that the recently enacted CARES Act does not prevent chapter 7 trustees from administering the stimulus checks. The CARES Act states chapter 13 trustees may not consider the stimulus payment as disposable income for purposes of a chapter 13 plan of reorganization.
Considering Filing Bankruptcy?
#2. With the current pandemic, many people will be considering filing bankruptcy in the coming months. The courts are open and accepting bankruptcy cases. The Coronavirus (Covid 19) has not stopped anyone from filing bankruptcy. As you may know, when a bankruptcy case is filed, a trustee will be assigned, and a hearing will be scheduled. Hearings are currently being conducted over the telephone or through an internet portal such as Zoom. Some hearings have been delayed although it appears some governments may soon be re-opening the economy. If and when the federal government re-opens, expect hearings to be conducted at the federal courthouse as they were prior to the Coronavirus. If you are in the process of filing for bankruptcy, it may be best to spend your stimulus check prior to filing chapter 7. You should contact a bankruptcy lawyer in your state for advice as to how to handle your stimulus money. For recently filed chapter 13 cases, the stimulus payments are not considered disposable income and most chapter 13 trustees are not taking them.
#3. You may be waiting on your stimulus check before filing for bankruptcy. If that is the case, contact a bankruptcy attorney now for advice on what you need to do to prepare for your case. You likely will not be advised to turn over the stimulus money, however, it may be a good idea to talk to an attorney about filing for bankruptcy to get pre-bankruptcy planning started. Once your stimulus money runs out, you will want to prevent any pending foreclosure or repossession from happening, especially if you are out of work, on furlough, or your hours have been cut because of the Coronavirus pandemic. Your attorney will help you figure out what your best strategy will be.
Pre-Bankruptcy Planning
Which Chapter of Bankruptcy Should You File?
#4. You may need to decide whether chapter 7 or chapter 13 is the right bankruptcy for you. If you need to save a house or car from foreclosure or repossession, consider chapter 13. If you are out of work, chapter 7 likely will be your best option. However, call an attorney for advice. You can also convert from one chapter to another if that makes sense for you. Every case is different so no one size fits all strategy can help everyone who needs bankruptcy.
Make Sure Your Property Is Safe
#5. If you have decided to file bankruptcy under any chapter, make sure you know what property you can and cannot keep in your bankruptcy case. Call your attorney, tell him or her about everything you own, and what liabilities you have. Ask about any property you want to keep. Make sure there is a bankruptcy exemption that protects either personal or real property you own. If there is no bankruptcy exemption that protects your property, you may need to go to chapter 13 to protect it, or face giving that property to a trustee. Trustees will sell or liquidate any unprotected property. Then the money the trustee receives will be distributed to your creditors. If nothing else, plan to sell that property prior to filing. Talk to your attorney about how to do this or what your best strategy will be before you file any bankruptcy.
Credit Counseling Course
#6. Take your credit counseling course. Everyone who files bankruptcy must take a credit counseling course. Your attorney might have some referrals for you, or you can Google credit counseling courses for bankruptcy. The course is about two hours long and you can usually take it by phone or over the internet.
Documents You Will Need
#7. Start preparing your documents now. Both your attorney and trustee are going to need to see documents such as pay stubs, bank statements, tax returns, copies of mortgage statements, leases or contracts, creditor bills and statements (gather any creditor billing statements you think might not be on your credit report), valuations for your home, car(s) and any other expenses or luxury items you own, and any other important documents. Make two sets as you will need to send documents to your attorney and trustee. The more organized you are, the smoother your bankruptcy case will go. Prepare to hand over one set of documents to your lawyer to get your case started. The second set will go to your trustee after your case has been filed.
Paying Creditors Prior to Filing Bankruptcy
#8. Lastly, do not pay back any money to friends or family prior to filing bankruptcy. The bankruptcy code considers these payments to be preferential transfers. The law sees a loan from a friend or family member the same as your credit card accounts. If you decide to pay back a loan from your mom rather than paying credit cards, you just made a preferential payment because you “preferred” paying mom back instead of any of your other debt. The bankruptcy trustee will find this and force either you or your mom to give back to money.
Also, do not try to “hide” any asset be giving it away or selling it to a friend for $1.00. These are called fraudulent transfers under the bankruptcy code. The trustee will find out about it and take the property for liquidation. The bankruptcy papers specifically ask if you have paid back a friend or family member in the months prior to your bankruptcy filing, or if you have given anything of value away, or if you have sold anything of value. If you answer these questions untruthfully, you could face serious fines, penalties, prison time, and have your bankruptcy canceled without a discharge. If you find that you need to make such a transaction or have already done so, call your lawyer immediately for advice. You may have to wait to file your case. If you have already filed and now realize you have made such a mistake, talk to your lawyer about it. Disclosure of assets and what you have done with your property or money prior to filing is extremely important. Do not make this mistake and end up in bankruptcy litigation or worse.
Filing bankruptcy is a tricky endeavor. Call an attorney before you take bankruptcy on or file any bankruptcy case. Get advice from a lawyer you have met with and trust. If you get a consultation and you do not meet with an actual bankruptcy lawyer, be cautious before hiring this law firm. Conduct your due diligence and go with a lawyer you trust.
