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Ways to Plan Ahead if You Know You Will File for Personal Bankruptcy

December 21, 2010

In the experience of our Rubidoux consumer bankruptcy lawyers, most people who file for bankruptcy don't think strategically about it in advance. That's a shame, because planning ahead for bankruptcy is almost always possible and can help filers get the most out of their bankruptcies. Let's start by noting that we do not mean to suggest it's a good idea to start transferring assets to friends and relatives to hold for you before you file. This is hiding assets, it is illegal and it can put you in jail, or at least get your bankruptcy thrown out of court with no ability to re-file. But if you know you're headed for bankruptcy, you can make a few financial moves that maximize the debts you can discharge while minimizing the chance of costly mistakes.

For one thing, potential bankruptcy filers should know that not all debts are dischargeable in bankruptcy. In particular, child support and tax payments can never be forgiven, no matter how big the backlog is or how little your ability to pay them. If you have only limited money with which to pay debts, it may be smart to put it all toward the non-dischargeable debts, and ignore dischargeable credit card or medical debts. While you're planning, you should also take a look at California's bankruptcy exemptions, to see if you can maximize the property and money you keep. Again, this should not be outright hiding of assets, but converting one kind of property into another. An experienced Irvine personal bankruptcy attorney can advise you on what to change and where the line is drawn.

There are also some things bankruptcy filers shouldn't do just before filing for bankruptcy. In addition to hiding assets, filers should never try to get the most out o their bankruptcies by going on wild spending sprees. Heavy spending or lots of cash advances within a few months of a bankruptcy may be considered an attempt to defraud the court. If it is, you will still have to pay those debts. This will probably not apply to large debts you genuinely had to take on, such as high medical bills, or to ordinary spending on groceries and housing. Finally, if you have a large debt to the same bank where you keep a checking or savings account, you should know that the bank is legally permitted to take money out of your account to satisfy that debt. Some lenders may try to do this when you file for bankruptcy, often with a credit card debt they believe won't be fully paid. This is not legal after the bankruptcy is filed, but you're still better off moving your money if you know you're headed for bankruptcy court.

Howard Law PC appreciates having the chance to help clients pre-plan their bankruptcies, when possible. Many people delay filing for bankruptcy for as long as possible because the idea upsets them, or makes them feel like a failure. This understandable feeling can actually hurt filers, however, by draining assets that would otherwise be protected and denying them the chance to plan. Our Dana Point individual bankruptcy lawyers welcome the chance to talk to potential clients months before our services are really needed. By discussing your financial situation early, we can help you protect your finances as much as possible and avoid costly mistakes. This can give you a solid base when you begin the slow but rewarding process of recovery.

If you feel like you're drowning in debt, don't let unnecessary fear or shame keep you from protecting your future and your loved ones. Call Howard Law for a free, confidential case evaluation at 1-800-872-5925 or send us a message through our website.