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Bankruptcy Actions To Take Before It's Too Late

When it's become increasingly obvious that your financial situation is not going to improve without drastic action, it may be time to consider filing chapter 7 bankruptcy. You can take some perfectly legal actions before you file that might have you getting even more relief out of the filing. Read on and find out about actions to take before it's too late.

Is Your Timing Right?

If you have moved from one state to another in the past several years, you may have some choices when it comes to bankruptcy. States have drastically different exemptions for bankruptcy. Some states don't allow many exemptions and some are generous. In some cases, filers can choose to file using the exemptions from their previous state of residence. Check the exemptions from both states and speak with a bankruptcy lawyer about which one to go with.

In a related matter, you have to be a resident of some states for a certain period of time before you file. In many cases, you can file using your previous state only if you have not been a resident of your current state long enough. If the exemptions for your current state look better, you might want to wait so you can file there.

Transfer and Move Those Assets

Chapter 7 bankruptcy is an excellent way to discharge debt but it can come with property losses. If your property is not covered by an exemption, you could lose it to forfeiture. You can, however, take some actions before you file to protect some of that vulnerable property. It's important for filers to disclose to any transfers of the property going back several years prior to filing. Transfers mean selling, giving away, trading, etc. Given that some property is protected by exemptions, you can move the unprotected property into a more protected category. For example, money in a savings account (which may be unprotected by exemptions) could be used to purchase an item that will be protected (like a vehicle).

Make Other Big Life Changes

If you are planning to divorce your spouse, you might want to consider the effect of bankruptcy on it and vice versa. If you file before your divorce, income could be an issue. You will have trouble filing if your income combined with your spouse is higher than your state's median. If your income is too high, you might want to wait and file later after you've made the split. On the other hand, filing while you are still married could allow you to double your exemptions (in some states).

Don't do anything without consulting with a family law attorney.