5 Pre-Filing Tips for Bankruptcy in New York

Filing personal bankruptcy in New York can be an extremely effective–and legal–way to deal with overwhelming debts. However, since it is a legal process, that also means you have to be aware of the rules and understand how they will impact your case.

Here are 5 pre-filing tips for bankruptcy in New York. Learning about these now may save you headaches down the road.

1. Filing for bankruptcy just before you file your tax return. If you’re expecting a refund, then creditors can seek to have your refund included in your assets for the bankruptcy case, and you risk losing that money to creditors. Instead, wait to file for bankruptcy until after you’ve filed your tax return; that way you can spend the refund.
2. Cross-collateralization: Same lender, different loans. If you have a loan from the same bank where you have your checking or savings account, then the bank may attempt to freeze your account if you default on or are unable to pay your loan. Debtors often think that their separate accounts are treated separately. But the banks see things a little differently. It comes down to the language in your loan contracts with the bank. This is something a good New York bankruptcy attorney can help you with.
3. Money Owed to You. Money owed to you (i.e., an account receivable) is considered an asset of the bankruptcy estate that must be disclosed. Depending on the amount and the level of urgency of your own situation, there may be instances when it makes sense to delay your bankruptcy filing.
4. Preferred payees. Be aware that you can’t just pay back the creditors you like more in advance of your case. In other words, you can’t strategically pay your friend back that $1,000 you owe her right before you file. That’s considered a preference payment because you’re preferring one creditor over the others. And those transactions can and will be reversed. Remember that while the purpose of bankruptcy is to protect debtors, it’s also to create an orderly process that aims to treat all creditors equally. So when you meet with your New York bankruptcy attorney, make sure to disclose all debts owed as well as any debts recently paid. It is especially important to disclose any payments to relatives; a trustee can go back a full year and recover payments to preferred payees
5. Incurring additional debt. It is strongly recommended to not incur additional debt prior to your bankruptcy filing. That means don’t apply for a new credit card or take out a new loan. If you do, your actions may be viewed by the bankruptcy court as lacking in good faith and could jeopardize your ability to get a discharge at the end of your case. Additionally, if you do incur such debt and the court does not allow it to be discharged, then you’ll be responsible for paying it.

These and many other points are important to consider when filing for bankruptcy. Feel free to contact me at (718) 855-6840 for a free initial consultation to sort out your debt problems and bankruptcy needs.

This article originally appeared on my blog at 5 Pre-filing Tips for Bankruptcy in New York