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Preparing for Bankruptcy

Rushing Law Firm, PLLC July 18, 2023

No one looks forward to filing for bankruptcy. Though it can be a helpful tool to use when you’re buried under crushing debt, it can also be a long process that creates stress and uncertainty about your financial standing in the meantime. Fortunately, an experienced bankruptcy law firm can provide you with the information you need to make wise decisions.

At Rushing Law Firm, PLLC, we stand side-by-side with our clients as they look for a pathway out from under their debt and move toward a brighter, more stable future. Our team is ready to assess your situation, explain your options, and lead you in the right direction. If you are facing bankruptcy in the El Dorado, Arkansas area, including the surrounding communities of Magnolia, Camden, Crossett, Union County, Columbia County, Ashley County, or Ouachita County, reach out to our bankruptcy attorney to schedule a consultation. 

Steps to Take Prior to Filing for Bankruptcy

Almost as impactful as the filing itself is knowing how to prepare yourself for the process beforehand. By following the list of tips below, you will lay a firm foundation on which you can build your bankruptcy filing. Putting yourself in the best starting position possible can go a long way toward solving your debt issues in a timely manner and getting you back on your feet. 

File Your Taxes

This may seem obvious, but making sure you have filed your tax returns as legally obligated is a major box to check. When filing for bankruptcy and looking to start fresh, the last thing you need is the IRS breathing down your neck. It is also important to note that outstanding tax debt is not dischargeable through bankruptcy. 

Stop Automatic Payments

When you have authorized your creditors to make automatic withdrawals from your accounts, they will continue to do so until they receive notice of your bankruptcy filing. To keep this from happening during the short period of time between filing your papers and the creditors being notified, you should take the step of stopping these automatic payments. 

Document Your Debt Honestly

Bankruptcy laws are complex and strict regarding proper documentation of all debt. If you attempt to hide information or fail to disclose certain debts, you may be penalized for it later on or simply miss out on the chance to have more of your debt discharged. 

What NOT to Do Before Bankruptcy

Just as important as the steps you do need to take prior to filing for bankruptcy are the things you should avoid doing. Making the wrong move or failing to use good judgment can result in a more complicated process and further financial challenges during the course of the bankruptcy process. 

Don’t Pay Off Dischargeable Debt

It’s important to know what types of debt are or are not dischargeable under bankruptcy. In your current situation, any money or income you do have should not be used to pay off any debt that will eventually be discharged through bankruptcy. Speak with your bankruptcy attorney to learn more about what types of debt you should avoid paying off before filing for bankruptcy. 

Don’t Use Your Retirement Accounts to Pay Debt 

Your retirement accounts are safe from bankruptcy, meaning those funds cannot be used to pay off your debt during the bankruptcy process. With that being the case, you should not use that money to pay off any of your debt before filing. 

Don’t Take On New Debt

This may seem like an obvious tip, but there are people who make the mistake of purchasing large items (like cars or real estate properties) shortly before filing for bankruptcy. When you’re on the verge of taking action to find relief from your debt, taking on new debt is never a wise choice. 

Don’t Move Your Assets 

While it may be tempting to transfer assets or funds to different accounts in order to protect them from being liquidated in bankruptcy, it is imperative that you refrain from doing so. If the bankruptcy court learns about such moves, it could lead to some of your debt being declared exempt from being discharged. There could also be potential criminal penalties if the situation is deemed to be serious enough. 

Don’t Pay Off Selective Loans

You could also potentially be penalized if you attempt to pay off debts to friends, family members, or “preferred” creditors within a certain time period of your bankruptcy filing. If you are found to be making “preferential” payments to select creditors, these payments can actually be reversed by the court. 

How Legal Counsel Can Help

The bankruptcy process, like any other legal matter, is not something you should handle on your own. Put your situation in the hands of a skilled professional. A bankruptcy law firm can provide guidance and insight into your unique circumstances, keep you updated about the options that are available to you, and help you make informed decisions throughout the bankruptcy process. 

Learn More About Your Bankruptcy Options

Filing for bankruptcy doesn’t have to be a death sentence for your finances. Making the right choices and following the proper steps can help you out of your pit of debt and put you back on the road to financial stability. Working with a strong bankruptcy law firm should be your first move. 

If you are looking to hit the reset button on your finances due to your outstanding debt, you need the help of legal professionals to inform you about what to do—and what not to do. Contact us at Rushing Law Firm, PLLC today to schedule a consultation to discuss your situation. We proudly serve clients in El Dorado, Arkansas, as well as the surrounding areas of Crossett, Camden, Magnolia, and throughout Ashley County, Ouachita County, Union County, and Columbia County.