Things To Do Before You Declare Bankruptcy

Once you decide to declare bankruptcy, there's a bit of work to be done before you file. Take a look at these tasks and get prepared. Your bankruptcy is sure to go smoother if you make the below moves. Read on to find out more.

Check on Income Requirements

To declare bankruptcy, filers have to meet the income guidelines. The bankruptcy codes now require filers to show that their income falls below certain levels. Since the income of the average wage-earner varies by location, the filer's income is compared to the state's median income. When your income is higher than the median income of your state of residency, you must take what is known as the means test. This test is really just an extended version of one of your bankruptcy documents where you state your income.

The so-called means test applies to only the last six months of your income. If you have income that fluctuates or has dropped recently, you might want to wait before you file if your income is too high. If that won't help you, maybe using some deductions might. The bankruptcy codes allow filers to use certain financial obligations to reduce their income. That might help them meet the median income requirements. For example, if you have an unusually high mortgage, you might get a deduction. Another alternative is to file chapter 13 rather than chapter 7. Chapter 13 has no maximum income requirements. Talk to your bankruptcy lawyer for more help with "passing" the means test.

Get Your Homework Done

Everyone has to complete a credit counseling class before they can file for chapter 7 bankruptcy. This class consists of creating a budget based on your financial situation. It will be reviewed by a credit counseling agency to see if you are qualified to file.

Talk to a Bankruptcy Lawyer

Even if you are not sure you are ready to file for bankruptcy, it's wise to speak to a bankruptcy lawyer as soon as you begin considering it. There may be other issues you need to know about before you file. Some of those include the following topics:

• Use of credit cards to purchase items.
• Use of credit card lines of credit to make cash withdrawals.
• Selling, giving way, or trading property.

The bankruptcy trustee has the power to look back several months before you file. Speak to a lawyer so your bankruptcy goes as smoothly and successfully as possible.

To learn more, contact a bankruptcy lawyer.