Declaring Chapter 13 bankruptcy can be a smart financial move, but it’s important to understand that there are actions you can and cannot take during the process.
Here are some “dos” and “don’ts” for Chapter 13.
Do: Seek Court Approval Before Selling Property
The court must approve all transfers for real estate, vehicles, or valuable assets like jewelry or artwork.
Be prepared to show that you’re selling the property at fair market value. Don’t try to sell property to family members or friends. It won’t go over well, even if you’re selling the property at market value.
Do: Tell Your Bankruptcy Attorney if You’re Involved in Another Case
Launching a personal injury lawsuit? On workers’ compensation? Find out you’re named in the will of a lost loved one?
All of these are legal cases that could change your financial profile. Whether they result in a windfall or a reduction in funds, your bankruptcy attorney needs to know about them. Your attorney can notify the court and gain the appropriate direction for how to handle your involvement in these cases.
Don’t: Try to Hide Assets
Attempting to hide assets is committing bankruptcy fraud, which is a federal crime.
There’s usually no need to hide assets. People file Chapter 13 so they can keep their assets, going onto a payment plan rather than selling off all the assets to pay off creditors.
As your bankruptcy attorney, we can protect your assets. The value of your non-exempt assets will determine how much needs to be paid back to non-priority unsecured creditors, but there’s still no value in hiding them.
Bankruptcy exemptions are quite generous, and most of our clients find they can protect every asset they have with the existing exemptions.
Don’t: Take Out New Credit
Some entities may offer you loans even while you’re still in bankruptcy, but you usually shouldn’t take them up on it—and can’t without prior court approval.
Sometimes, the trustee will approve a car loan if you need the car to get to work and if your old car doesn’t run anymore. Do this only if it’s an absolute necessity. If you can get by on public transit or your old car can run a little while longer, it’s better to avoid taking out new debt. Otherwise, you won’t get much of a fresh financial start when the bankruptcy is done.
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Chapter 13 is not a case that you can handle on your own. If you want to ensure you get a discharge, it’s important to call our office to schedule a consultation today.
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