One of the biggest mistakes people make when filing for bankruptcy is failing to prepare. The process is governed by many rules and guidelines that are imperative for a successful outcome of the case. Knowing how to prepare minimizes error and makes the most out of the process. There are a few important steps to take before filing for bankruptcy.
Freeze Your Finances
This doesn’t mean to stop paying your debts or stop earning an income, but refers to how current debts are handled prior to filing. Bankruptcy laws may disqualify certain debts from the case if they were acquired within the 90 days prior to filing. Further, paying off debts before bankruptcy can work against the case. While it is never a good idea to stop paying or purposely default on a debt, making significant payments prior to filing may move a debtor out of eligibility for filing in the first place. The general rule of thumb is to keep payments as they have been and do not accumulate more debts prior to filing. It is also a good idea to leave assets alone, not selling or transferring them before filing.
Organize Your Documents
The bankruptcy petition requires an in-depth analysis of a your financial situation, which requires you to list in complete detail your debts, assets, bank accounts and sources of alternative funds. This information is used by the court to gain an adequate representation of what you can reasonably afford to pay or not pay. The court may ask you to provide copies of your paycheck stubs, tax returns for the past three years and any statements from funds that may be a factor. Having this information organized and set aside can ensure proper preparation of the petition and minimize delays in the case.