The process of filing for bankruptcy can seem intimidating, but it doesn’t have to be. Whether you’re deciding whether or not bankruptcy is right for you, or you’re in the middle of it and need help understanding what happens next, this article will explain how to file for bankruptcy and give tips on how to avoid common mistakes.
The first step in the bankruptcy process is to gather your documents. This includes tax returns, pay stubs, bank, brokerage and retirement account statements, appraisals of real estate or other assets, vehicle registrations and any other documents related to debts you owe or property you own. You will also need to complete a credit counselling course before and after you file. The cost of this course is typically less than $50 and can sometimes be waived.
It’s important to be honest about your finances and don’t hide any assets or try to cheat the system. This is considered fraud and can be punished by the court. For example, withdrawing large amounts of cash before filing raises red flags and the trustee may assume that you’re hiding money. The same goes for repaying certain debts before filing, such as a loan to a relative or a credit card balance. Your bankruptcy attorney Hawaii can advise you on the best timing of these payments.
Another thing to avoid is taking out new debt before filing. This can also be challenged as fraudulent borrowing and prevent you from getting a bankruptcy discharge. If you are planning to purchase a home, a car or other asset that isn’t necessary for your daily life, you should consider waiting to buy it until after you file for bankruptcy.
Once you’ve filed for bankruptcy, you will attend a meeting with the trustee who reviews your case. This is typically a 3 to 6 week process and can be conducted in person or via video conference. If you’re being sued by a creditor or are facing a judgment lien (like wage garnishment, bank account attachment or repossession), it’s usually best to file for bankruptcy as soon as possible. While bankruptcy does stop lawsuits, it’s often too late to prevent a money judgment lien from being attached after a court orders one.
Once your bankruptcy is over, you’ll have to rebuild your credit. This will require responsible spending habits, such as only using a credit card for purchases you can afford to pay off and checking your credit report regularly for errors. You will also want to make sure any debts discharged in bankruptcy are removed from your credit reports. Lastly, it’s important to continue making on-time payments and to use a secured credit card, which will allow you to build up your credit score over time.
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