Nowadays, with all the changes in the Bankruptcy Code, I find myself more and more advising clients how to prepare for a bankruptcy filing a few months down the road. Bankruptcy preparation can be difficult. You’ll need to assemble bank statements, pay stubs, credit card bills and collection letters, but in the end most believe that all the work was worth it.
First of all, it often takes people months and months of agonizing soul searching before they even make that first phone call and admit they need help with their financial situation and to start to prepare accordingly. Usually the calls from creditors have gotten to be too much, or there is a garnishment at their door step….Sometimes waiting can be dangerous. So my advice is to start on your bankruptcy preparation before the situation gets too far gone: talk to an attorney early on….when things start getting out of hand. So many lawyers give lengthy free consultations over the phone, and even in person, that it is to your advantage to meet with one or two and pick their brains. Meeting an attorney for a consultation does not mean you will end up filing bankruptcy.
You don’t want to give that car to your sister or transfer anything out of your name if you are thinking about filing bankruptcy. Those are big no no’s. Many people ask me why can’t they just put their house in their mother’s name, or give their boyfriend a gift? NO WAY! That can be FRAUD! Keep everything exactly where it is and then talk to an attorney experienced in consumer or small business bankruptcy law for advice. You don’t have to lose your assets, but you must learn the proper way to protect them!
The new doorway to bankruptcy is the Means Test. You cannot even file a Chapter 7 without ‘passing’ the Means Test. Congress set up this Test. It is intended to be an objective and arbitrary Test to determine if you have the ‘means’ or ‘income’ to pay at least a certain percentage of your debts. Part one of the test looks at the gross income of all persons in your household, for the six months prior to the month you decide to file. So perhaps we want to wait a month or two, so that year end bonus doesn’t count. Or maybe cut back on overtime so we can slip under the limits. The limits are based upon the Median Income for households of your size in your State. If you ‘flunk’ Part one, you do get another chance, if you can pass Part Two of the test. This part allows for certain deductions off the Gross Income. Not necessarily real deductions, but some relief. This is where an experienced attorney can really help you, perhaps make suggestions that will allow you to pass the Means Test and be allowed to file a Chapter 7. If you flunk Part Two of the Means Test, you are looking at a mandatory Chapter 13….that means a repayment plan…..and the amount you have to pay back depends upon the results of the Means Test.
You can see the need for bankruptcy preparation, can’t you?
Lorraine M. Greenberg