Before You File: Actions To Take Prior To Your Chapter 7 Bankruptcy

Once the decision to rectify your financial woes with a bankruptcy filing has been made, you still face some important tasks and considerations. You want to take full advantage of this opportunity to have your debts forgiven and start fresh again, so a bit of work before you sign that bankruptcy petition is in order. Read on to learn more about some vital issues to consider before you file.

Have you lived in your state long enough to qualify for homestead exemptions? Being qualified to file in a particular state may not mean that you also will have the full benefit of homestead exemptions. Moreover, exemption amounts can vary from state to state, so you may benefit more from filing in certain states.

Why are exemptions important? Your home may constitute the single largest asset in your possession, and in some cases it could be placed in jeopardy by your bankruptcy filing. Exemptions, which are available in every state, can vary and the higher your exemption the more value you can deduct from your property value. This deduction could allow you to reduce the equity enough to keep your home.

Check out the exemptions in your state if you are considering filing, and in other states if you are considering moving. It could be advantageous to put off that filling or to file before you move. For example, some states allow joint filers (when you and your spouse file jointly) to double their exemptions, which could help you keep more property. It should be noted that exemptions apply not just to real estate, but most states offer exemptions on other types of property, such as vehicles and personal property.

Is your relationship in as sad a state as your finances? If you and your spouse are considering parting ways, it could pay to take a look at what should happen first: the divorce or the bankruptcy. All states require that your income be under a certain amount to file, and the income of your spouse is considered whether you are filing jointly or not. If your income is too high to qualify at this time, you may want to divorce first and then file on your own. Be sure to take into consideration what the effect of double exemptions could mean to holding on to property, however.

Are you thinking about selling or giving away property? You might think that doing so and then filing for bankruptcy would be illegal, but that is not always the case. There are very specific rules about selling and transferring property, but it can be done. Be sure to work closely with your bankruptcy attorney to avoid making the wrong moves. It is, for example, okay to take money from a savings account and purchase something that may be exempt from seizure, such as your primary vehicle.