Double Check These Issues Before Filing Chapter 7

Posted on: 26 January 2022

It's easy to see why some bankruptcy filers can get so excited about filing. After all, months of worry and stress about an ungainly debt load is about to come to an end. However, before you file, you should probably take note of a few issues listed below. It will make your bankruptcy process smoother and less stressful for you.

Get Your Assets in Order

What you do with things like personal property and bank accounts in the months before you file for chapter 7 matters a lot. Your bankruptcy trustee has the power to look back at your transactions and undo certain acts. For example, you cannot suddenly pay off a personal loan because you don't want to include it in the bankruptcy. That doesn't mean you cannot protect your property, though. Before acting, speak with your bankruptcy lawyer, but it's usually perfectly fine to sell an asset and use the money to buy another asset that might be protected from seizure under the law.

Understand How Location Affects Exemptions

An exemption is a powerful thing in bankruptcy. It allows chapter 7 filers to keep some items of property if the values match up. Every state, however, has different exemptions. You might not be stuck with the exemptions available in your state if you have recently moved. In some cases, new residents can use the exemptions of their former state if they wish. Compare the exemptions in both states and talk to a bankruptcy lawyer to help you decide what is best for your situation. However, don't wait too long because new residents have a limited amount of time to use that former exemption.

Know About Homestead Exemptions

One type of exemption rises above others in importance, and that is the homestead exemption. This exemption applies only to your primary residence, and you must be living in the home at the time of your filing. Since homes mean so much to nearly everyone, losing a home to a bankruptcy seizure can be devastating. In most cases, though, your primary residence is safe thanks to the homestead exemption. However, to establish a homestead, you must live in the state for a certain length of time, and that varies from state to state. While not meeting the time might mean putting off your chapter 7 filing, you can still file later when the timing is better.

Speak to a local chapter 7 bankruptcy lawyer to learn more about what can be done to minimize your chances of potential liquidation and loss.