How To Properly Plan For Your Bankruptcy

October 27, 2011 by  Filed under: Bankruptcy 

Just like with any other financial strategy, bankruptcy requires smart planning so that debtor assets can receive the maximum protection. Let’s take a look at a few items you should consider when planning for bankruptcy planning:


Whether you live in an apartment or own your home, planning for your housing needs is an essential part of preparing for bankruptcy. Do you want to keep your home? Have you fallen behind on payments? How much do you owe? If you plan to file for Chapter 7 bankruptcy, can you quickly pay off delinquency amounts? If you plan to move out of your home, is it best to move before or after bankruptcy? Whatever you decide make sure you have a contingency plan.


Do you own your vehicle outright, or do you have a car note? If you own your car, find out if the exemption amount allowed will cover the entire value of the vehicle. If the exemption doesn’t cover the car’s value, the vehicle could be sold by the bankruptcy trustee. If you have a car note, decide whether you want to keep the vehicle. If you want to keep your vehicle, make sure you have enough income to pay off any delinquency balance and the regular monthly payments. As is the case with a house, if you file Chapter 7 bankruptcy, you have only a small window of opportunity to pay off the delinquency balance. On the other hand Chapter 13 bankruptcy allows you to repay a delinquency balance over the period of 3 to 5 years.


How stable is your job? If you’re filing Chapter 13 bankruptcy, you will need stable employment that pays you a certain amount each month. Employment with widely varying paychecks (i.e. commission only work) may not work well in Chapter 13 bankruptcy. Also, if you only have temporary or seasonal employment, speak with your bankruptcy attorney about filing a Chapter 7 bankruptcy instead.

Unsecured Credit

If you have credit cards, stop using them as soon as you realize that you will be unable to repay the balance. If the bankruptcy court determines that you continued to use your credit card when you knew you couldn’t pay off the debt, they may make the debt nondischargeable.

Settled Debts

Did you pay off a credit card or a family loan right before filing bankruptcy? If so, you may be dinged by the bankruptcy trustee for illegally giving preference to one creditor over another. If it is determined that you paid off some creditors while ignoring others, the bankruptcy trustee may demand that the money is returned to the bankruptcy estate.


Whatever you do, DO NOT withdraw any money from your retirement account. Retirement savings are protected from creditors in bankruptcy; but once you take money out of the account it loses that protection. Also, do not attempt to protect cash by making unusually large deposits into your retirement account right before bankruptcy. If the bankruptcy trustee suspects that you are attempting to unfairly shelter cash in your retirement account, he/she may demand the money is removed and placed in the bankruptcy estate.

Reed Allmand, sponsoring attorney for, is constantly looking for ways to provide the best financial information for his clients. Whether you are considering filing for bankruptcy, or are currently going through a Chapter 7 or Chapter 13, visit for up to date news and information you need to know.

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