So you think you may have to file bankruptcy? 8 things you need to know

This time of year seems to be “bankruptcy season” as many people file for relief from their creditors when they get their taxes filed. In light of that, these are some tips, generally and not specific legal advice, to get you started.

  • 1. For a person, there is generally two types of bankruptcy you can file and which you file depends on your income and if you filed in the last 8 years;
  • a. A Chapter 7, which lets you walk away from most debt that you don’t choose to keep, BUT YOU MAY BE ABLE TO KEEP YOUR HOUSE AND CAR, assuming you are able to make the payments and that you don’t have too much equity in them; and
  • b. A Chapter 13, if you have too much income (per the Court’s rules) or if you filed a Chapter 7 in the last 8 years, you will most likely have to file a Chapter 13. This means that the debts are all paid off, but not at 100 %, some creditors may get nothing, but no specifics can be given until you speak to a bankruptcy attorney.
  • 2. You will need to get together:
  • a. 6 months’ bank statements;
  • b. 6 months’ paystubs;
  • c. Last two filed tax returns;
  • d. A list of your creditors;
  • e. A list of your average expenses every month;
  • f. Copies of any car titles and deeds to your home; and
  • g. If you haven’t filed your taxes, you will need to do so before your case can be discharged (Closed but the debts you didn’t keep are gone).
  • 3. Once you file your taxes, or if you have already filed them, don’t spend the return until you talk to your bankruptcy attorney, as you may be able to keep some or all of it, BUT;
  • 4. You cannot pay back family members for loans you owe them with the tax money as the Bankruptcy Court can take the money back (one of the things an attorney should discuss with you, but it easier just not to do it and talk to the attorney first);
  • 5. In Kentucky (as I am not licensed in other States), if your driver’s license is suspended for a Civil Judgment, not court costs, you may be able to get your license back the day after you file your bankruptcy with the Court;
  • 6. There are some things you CANNOT bankruptcy, but you still have to list on your paperwork:
  • a. Taxes;
  • b. Student loan payments;
  • c. Child and family support orders;
  • d. An intentional Tort, which means you did someone on purpose to someone else, for example you cannot bankrupt an assault case; but you can bankrupt a judgment, related to a car accident as long you were not drunk or high.
  • 7. A non-lawyer is not allowed to help you with your filing or preparing of the Court documents; and
  • 8. Most importantly, make sure you talk to an attorney who handles bankruptcy cases on a regular basis, as no matter how easy it may look, trying to fix a case once it is filed can cost you more than you would have “saved” going to an attorney that just does one case every few months or years.