Can You Preplan Your Bankruptcy?
If you are being hounded by creditors, if you can no longer make the minimum payments on your credit cards and if you are now in danger of losing a place to live, it's likely time for a chapter 7 bankruptcy filing. You can, and should, do some planning ahead to help ensure that you get the most out of this major financial and legal move, so read on to learn more about why preplanning is beneficial and most importantly, legal.
State Exemptions
While bankruptcy is considered a federal law, each and every state has their say about exemptions. Exemptions are a given amount that may be deducted from your property, which could help you to keep that property instead of forfeiting it to the bankruptcy trustee. Exemptions can apply to your home, which is known as a homestead exemption and other property like cars and personal goods.
Some states allow you the choice of using either your current state of residence or your previous state of residence (if you have recently moved) when it comes to exemptions. Be sure to carefully consider the impact of using exemptions in each state, if you have the choice and observe the timing. For example, you may only have a certain number of months to use your former state's exemptions, but you also may not be able to file bankruptcy as a resident of your current state until you have lived there a certain period of time.
Homestead Exemptions
As mentioned above, you can reduce some of the value of your home if you are eligible for an exemption on it. If there is any one thing that gives bankruptcy filers nightmares, it is the prospect of losing their home by filing bankruptcy, so it's in your best interest to understand how homestead exemptions work in your state. Some states, for example, require that you own your home for a certain period of time to take advantage of the exemptions. If waiting a few more months before filing could save your home, you would be wise to do so.
Reorganization Tactics
This is a tricky area, so a close consultation with your bankruptcy attorney is vital before proceeding. If the bankruptcy court finds that you are attempting to perpetrate fraud by hiding, selling or giving away assets to prevent seizure from the bankruptcy trustee, you could be in big trouble. There are some things you can do, however, such as:
- You can use some of the funds in your checking account (which might be non-exempt) to purchase an asset that might be exempt.
- You may be able to sell certain assets, but you must not do so at an under market value price.
To learn some more pre-bankruptcy moves, speak to a law office like Jeffrey S. Arnold, Attorney at Law, P.C.