Debt is an issue that affects many people in the United States, and if your family is struggling to address ongoing expenses while also paying the debts that are owed, you may be considering bankruptcy. This option can provide you with relief from your debts and allow you to receive a fresh start and maintain ongoing financial success. As you prepare to file for bankruptcy, you will want to take the correct steps to ensure that all of your debts will be addressed properly, while also making sure you do not do anything that will affect your ability to receive debt relief.

Steps You Can Take to Protect Yourself When Preparing for Bankruptcy

• Gather financial information - You will need to fully understand all of the debts you owe, as well as the assets you own, all forms of income, and your ongoing expenses. By gathering statements from creditors and checking your credit report to uncover any debts you may not be aware of, you can be sure all of your debts will be included when you file for bankruptcy. Depending on whether you will be filing for Chapter 7 or Chapter 13 bankruptcy, you will need to understand whether you will be required to turn over any non-exempt assets or how much disposable income you may have to put toward a repayment plan.

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Following up on last week’s scenario, here are the financial, credit record, and other disadvantages of a forced 5-year Chapter 13 plan.

Our last two blog posts were about how the last 6 calendar months of income of a person filing a Chapter 13 case can determine whether his or her Chapter 13 payment plan lasts only 3 years or instead a full 5 years. We showed how even relatively small shifts in income can cause this huge difference.

Here’s a scenario showing how the timing of your Chapter 13 filing can shorten your payment plan from 5 years to only 3.

In our last blog post we explained how your last 6 calendar months of income can determine whether your Chapter 13 payment plan lasts 3 years or instead 5 years. We showed how even relatively small shifts in the money you receive can cause this huge difference.

A “preference” makes more sense when you see an example. Here’s one. This also helps explain how to avoid creating one.

Last week we explained why paying a creditor before filing bankruptcy could cause problems during bankruptcy. That’s especially true if the creditor you pay is one that you have personal reasons to favor. We explained the circumstances in which such a payment might possibly be considered a “preference,” or a “preferential payment.” If so, your favored creditor could well be required to return the money you paid, except not to you but rather to your bankruptcy trustee, for distribution to your creditors in general.

Do you feel like you should pay on or pay off a certain debt now, even though you’re behind on all your debts? It may be dangerous to do so.

Last week we explained how giving a significant gift before bankruptcy could cause problems during bankruptcy. This also applies to selling something for much less than it is worth. Such a gift or sale might possibly be considered a “fraudulent transfer.”