Are You Ready For Some Debt Relief?

The decision to declare bankruptcy often comes only after a lot of deliberation and worry. No one really wants to "declare" that they cannot pay their bills. Some consumers have little choice but to file so that they can salvage what is left of their assets and move on. No matter what has brought you to this point, it's best to move forward toward that filing date with both purpose and preparation. Things must be done, and some things must not be done before you file for a chapter 7 bankruptcy, so read on to learn more.

Things You Should Not Do

Some people who are about to declare bankruptcy have probably maxed out their credit cards on food, gas, and other essentials of living. If you do have any available credit on your cards, however, you might want to proceed carefully with the way you use them. To help protect the creditors who are about to be named in the bankruptcy paperwork, the laws provide some limits on how much can be charged by consumers right before they file. If you exceed those limits, you should be ready to explain how and why the card was used. For example, paying your car repair bill with a credit card is okay; paying for a new designer handbag is not okay.

Another thing bankruptcy filers should avoid is favoring certain creditors. Once you file for bankruptcy, your entire financial situation is in the hands of the bankruptcy trustee. The debts and the assets you own are all evaluated and creditors are paid, when there are funds, in a certain order of priority. If you paid off a loan to a relative because you were embarrassed to include it in the bankruptcy, the trustee could actually take back that loan and apply the money where they see fit. Along these same lines are look-backs for transfers or sales of assets in the months leading up to the filing. You cannot, for example, "give" your brother your boat just before you file for bankruptcy.

Things You Should Do

Before you file, you must undergo the credit counseling class. This class is really about ensuring that your financial situation is bad enough to warrant a chapter 7 filing. You can take the class online, over the phone, by mail, or in person. The information you provide about your personal financial situation is evaluated by a credit counseling agency and you must show that you cannot pay your debt obligations without filing for bankruptcy.

One last important thing to do before you file is to speak to a bankruptcy law firm about your financial situation.