Just A Few Things To Think About Before You File Bankruptcy

If you are like most, quite a bit of thought has already gone into the bankruptcy decision. Some filers, though, fail to consider some of the aspects of a chapter 7 filing. To help ensure that your filing and bankruptcy action goes smoothly, read about the three main considerations to keep in mind before you file.

Reorganize Your Finances

Reorganization usually refers to filing chapter 13 instead of chapter 7, but there is another kind of reorganization you should also consider. This exercise requires the advice and support of a bankruptcy attorney so that you can avoid being accused of making fraudulent transfers. It also involves an understanding of your state's property exemptions. It is perfectly legal to use funds that may not be exempt from bankruptcy seizure and use them to buy an asset that is exempt. For example, most filers get generous exemptions for personal vehicles. If you need a car, you can use the funds in a saving account to purchase one. The funds in the account might be subject to seizure if left there after you file.

Know What Exemptions to Use

Speaking of exemptions, state law varies quite a bit when it comes to exemptions. That means that what might be protected in Wyoming could be left vulnerable in Alabama. If you have recently moved to your current state of residence (or you are thinking about moving to a new state), you might be able to take advantage of a loophole and file in either state. Take a look at the exemption picture in both states to determine which state offers the most favorable outlook. In addition to that, some states allow filers to decide to file under state exemptions or federal exemptions and there could be quite a lot of difference in your potential property losses by choosing one over the other.

Using the Homestead Exemption

Every state has exemptions, but some separate real estate from other property like vehicles, jewelry, and other personal possessions. Real estate exemptions are known as homestead exemptions as long as you are referring to your primary place of residence. Losing a home through a bankruptcy filing can be a terrifying thought and, fortunately, that seldom happens to filers. Fortunately, homestead exemptions are often enough to keep filers in their homes as long as they are current on the mortgage. Unfortunately, however, there are a few time in residence rules to follow.

Bankruptcy exemptions can be confusing so take the unknown out of the picture by talking with your bankruptcy attorney about this area.