Your Finances In Bankruptcy

For many people, filing for bankruptcy is a tool for financial freedom. When debts become overwhelming and financial hardship strikes, bankruptcy can provide a solution to get you back on your feet. However, before you jump into the bankruptcy process it is important to consult with an attorney and gain an understanding about how your financial situation plays a role in the outcome of your case.

An Inside Look

Before discussing the basics about your finances in bankruptcy, you should know the different types of debt can impact your case. One of the main sources of debt brought into any filing is unsecured debt. These are debts that are not tied to any asset or collateral on the loan. Credit cards, medical bills, utility bills and some personal loans are examples of unsecured debts. Secured debts are also commonly brought into bankruptcy, and are things like mortgage and car loans. These debts are called secured because the item or asset is eligible to be repossessed and liquidated by the creditor if you default on the loan. There are also priority debts, which can be either secured or unsecured debts. A priority debt is one that is given first claim to repayment in bankruptcy. Common examples of priority debts include some tax debts, student loan debts and domestic support payments. Some of these priority debts may not even be eligible for a discharge in bankruptcy.

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As you enter the bankruptcy process you will be required to complete a petition form. This document is an extensively detailed list of your finances. You will need to provide the name of all your creditors and the balance owed. You will also list your income, fund accounts, and assets. Items like retirement funds, government assistance, domestic support payments and insurance policy payments are all considered part of your income and must be listed. All of the details about your debts, income and assets are important to give the court an idea of your financial standing.

It is common to be concerned about providing this level of detail, but you can rest assured it is necessary to help you have a successful outcome. Therefore, always be open and honest about your finances. Attempting to hide assets or conceal information about income is not a good idea, as it can be considered fraudulent by the court and lead to your case being dismissed. Further, be sure you have kept a steady spending and payment history prior to filing for bankruptcy. Attempting to pay off debts or accumulate more income within the months leading up to bankruptcy could impact your eligibility to file. On the other hand, accumulating more debt and purposely losing income before filing could be viewed as suspicious by the court and lead to a case dismissal.

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