John E. Pytte
Preparing for Bankruptcy
According to the American Bankruptcy Institute, 8,804 Georgia residents have filed for bankruptcy protection through the first five months of 2021 — 4,710 of them opting for Chapter 7 bankruptcy and 4,033 for Chapter 13 bankruptcy. A handful sought protection under Chapter 11 bankruptcy.
Bankruptcy is a scary word. Many people think it means losing everything and starting over with zero, but that’s not the case. A Chapter 13 filing generally lets you keep everything. Even a Chapter 7 liquidation plan allows for generous exemptions so that you can often keep your home, your car, and other personal belongings.
If your past due on payments and creditors are starting to haunt you, or you’re juggling minimum payments here and there while skipping payments on other debt, it’s time to consider the bankruptcy option.
If you do decide to take advantage of the bankruptcy code, what should you do with your debt? How do you prepare for the legal proceedings?
If you’re in or around Savannah, Hinesville, Richmond Hill, or the surrounding areas in Georgia, rely on me — your Georgia debt relief specialist — to guide you through the whole process. You can be free of your debts and get a fresh start in life, but you need to plan and prepare carefully. Contact me at Pytte Law immediately when your debt gets out of control.
How to Prepare for Filing Bankruptcy
It’s important that your taxes be current and all returns have been filed before pursuing bankruptcy. Your tax returns are essential to establishing your income, along with any pay stubs and records of ongoing income that you may have. Also, taxes cannot be discharged through bankruptcy, so any unpaid taxes will still have to be dealt with.
It’s also best if you remain current on your home and auto payments. If you’re behind on those payments and file for a Chapter 13 reorganization plan, it’s sometimes possible to consolidate the back payments into your reorganization plan and retain possession of your home and auto, though you’d still have to make the normal payments during the bankruptcy process. Chapter 7 offers no such “make-up” option.
Zero out your bank account or keep the funds extremely low, especially if you have debt obligations (credit cards or auto and home loans) with the same bank. When filing for bankruptcy, banks will often freeze your account, and you’ll have to work through the bankruptcy trustee to unfreeze your cash.
How Banks May Respond
A bank to which you owe money can use its “set off” loan provision to tap into your funds when you file for bankruptcy to pay down your debt. Your best bet overall is to set up a bank account when you have no debt obligations.
If you have authorized automatic deductions from your bank or credit card account, be sure to stop those. Though a bankruptcy filing will place an automatic hold on all credit collections, authorized monthly deductions often have a way of eluding the stop order, even if just temporarily.
Most importantly, thoroughly and accurately document all of your personal income and debt information. The bankruptcy court can deny your discharge of debts if it finds you have been dishonest. Worse, it can charge you with bankruptcy fraud, with hefty fines and even jail time awaiting those who are found guilty.
What Not to Do Before Bankruptcy
You don’t want to use a credit card to run up debt on items that are not essential to your basic survival — food, clothing, utilities — in the 90 days preceding your filing.
- Don’t go out and purchase jewelry or go on lavish vacations using a credit card. Doing so can lead the bankruptcy court to deem those purchases to be “presumptive fraud” and disallow them from your filing.
- Don’t hide, transfer, or sell assets below value to a friend, hoping to buy or get them back after your bankruptcy discharge. Doing so can lead to criminal charges and void your bankruptcy filing. However, if you honestly sell assets to survive, be prepared to document those transactions and show that they yielded true value as much as possible.
- Don’t tap into your retirement savings to pay debts. Your IRA, 401(k), or other retirement accounts will be protected during bankruptcy. Your creditors can’t touch those funds.
- Don’t selectively pay off loans unless they’re for your home or automobile that you need to preserve through your bankruptcy filing. If you make payments on Credit Card A consistently while not paying on others, for example, this can be considered a preferential transfer and be undone in bankruptcy proceedings. The court can seek the funds you paid preferentially to Creditor A to help pay other creditors as well. This is especially important if you’ve paid back loans from friends or relatives rather than institutions. They won’t be happy to receive notice that they owe money to the court.
- Don’t wait until one of your creditors has won a judgment against you in court. That creditor can then seize your assets and sell them off to honor the judgment against you. Even if the creditor wins only a lien against your home, that cannot be discharged through bankruptcy. If you’re facing a lawsuit over debts, you need to file bankruptcy immediately.
How Pytte Law Can Help
Though it’s possible to file bankruptcy on your own, I certainly don’t recommend it. There are numerous forms to complete and documents to file with the court. You’ll be required to attend a meeting of creditors. Depending on whether you file for Chapter 7 or Chapter 13 bankruptcy, there may be a reorganization plan you have to complete with the trustee and agree to. None of this is going to be as simple as filling out a one-page credit application, and it’s all going to be emotionally draining.
Rely on me and my team at Pytte Law to walk you through every step of the process. We can assist you in preparing for bankruptcy by helping you follow all of the steps discussed above, and we can then file all the documents and represent you at all court proceedings. We’ll make sure you adhere to all legal requirements, so your fresh start will come about without a hitch.
Call me at Pytte Law immediately for all your debt issues, including bankruptcy filings. I proudly serve clients in Savannah, Hinesville, Statesboro, Richmond Hill, and Ludowici, Georgia, including the surrounding communities.