Bankruptcy is a legal process through which people struggling with insurmountable
debt can obtain a financial fresh start through a discharge of their debts.
Depending on your current financial situation, you may file bankruptcy
under a certain chapter of the U.S. Bankruptcy Code. One of the most common
chapters for consumer bankruptcy is
Chapter 7, and it is known as “Liquidation Bankruptcy.”
Chapter 7 is characterized by liquidation because it involves the selling
off of assets and the use of those proceeds to make payments toward debts
prior to a discharge of debts. In Chapter 7 cases, a bankruptcy trustee
is appointed to your case. This trustee will be responsible for overseeing
the liquidation of your nonexempt assets, and distributing the proceeds
to any creditors with whom you have debts.
In Chapter 7 cases, particularly for individual consumers, the name Liquidation
Bankruptcy can be misleading. This is most Chapter 7 cases do not involve
the liquidation of assets. For many debtors, the limited property and
assets they own are often considered exempt from liquidation, and there
is little property that can be declared nonexempt.
- Exemptions – Our bankruptcy laws understand the important of enabling
individuals to have a fresh financial start, which means that they do
not strip debtors of all their possession. As such, there are exemptions
in bankruptcy proceedings that allow filers to keep certain property up
to a certain value. Common exemptions include a person’s primary
residence, certain benefits, automobiles, and personal property.
Determining what property is and is not exempt can be a challenging matter
in some cases, especially those involving business bankruptcy. For consumers,
however, exemptions are important to preserving personal property. While
our legal team can help you determine exempt and nonexempt assets in your
unique case, we also want to remind local residents that there are things
they should avoid when considering bankruptcy. This includes the intentional
liquidation of assets prior to a bankruptcy filing.
Here are some of the things you should not do in an attempt to repay your
creditors if you’re considering bankruptcy:
- Do not raid your retirement account. Many people in an attempt to be “honorable” will empty out their
retirement account to repay creditors only to be hit with taxes and early
withdrawal penalty fees. Bankruptcy may be able to protect your retirement
account and by extension protect you when you retire.
- Don’t use mortgage and rent payments to pay down credit cards. Many debtors are so afraid of their creditor’s threats of lawsuits
and wage garnishments that they will use rent/mortgage money to pay credit
card bills. In bankruptcy proceedings, the bankruptcy trustee will not
require you to become homeless in order to pay your creditors. But if
you take it upon yourself to forgo paying rent/mortgage payments to pay
creditors you may end up homeless by your own actions.
- Do not begin to sell other assets such as cars, jewelry and electronics
and use the cash to pay creditors of your choosing if you are considering
bankruptcy. The bankruptcy court may consider those payments to be favoritism on your
part and may dismiss your case or at least demand that the money/assets
are returned to the bankruptcy estate.
Speak With a Dallas Bankruptcy Lawyer
The bankruptcy process can certainly be a foreign process for many people.
Because there are also things you should avoid prior to filing, it is
important that you discuss your rights and options with an experienced
attorney who can help you determine the best course of action given your
unique circumstances. At Allmand Law Firm, PLLC, we provide free financial
empowerment sessions to residents throughout the Dallas – Fort Worth
area. Request yours today by