Top 10 Connecticut Bankruptcy Tips From a Bankruptcy Lawyer
February 23rd, 2023
The choices you make in the days leading up to filing for a Connecticut bankruptcy can affect your financial freedom once it is over. Here are some Bankruptcy Tips from a bankruptcy lawyer with years of experience. Following these tips and working with an experienced bankruptcy attorney from day one will help you discharge as much of your debt as possible, so you can get a new start.
Personal Loans Can’t Receive Special Treatment
Often, when families are struggling financially, they will turn to family and friends for help before filing for bankruptcy. Many bankruptcy petitions include lists of small loans from relatives and friends, and that means those “creditors” will receive notices as the bankruptcy progresses. You may want to keep your bankruptcy private by paying off personal loans first. Unfortunately, if you give one creditor preference over another, the bankruptcy court may contact your loved ones to “claw back” those payments and distribute them evenly.
Don’t Try to Gamble Your Way Out of Debt
Connecticut’s two casinos, Foxwoods and Mohegan Sun, can be a significant source of debt for some residents. If you or your spouse has a gambling problem, it may be tempting to take out a cash advance at a nearby ATM to try to gamble your way back out of debt. But those cash advances are often not dischargeable. It is better to cut your losses, reset, and get some help with any gambling addiction you may face.
Avoid Creating New Debt Right Before Filing
If you are already thinking about filing for bankruptcy, you should avoid making any big purchases or running up your credit card balances. If you do, the Bankruptcy Trustee may determine that those debts will not be dischargeable as part of the bankruptcy process. That means you could still owe that money after the bankruptcy is over.
Be Sure You Understand What Debts are Not Dischargeable
Unfortunately, bankruptcy doesn’t erase every debt. Some, like recent tax debt, student loans, or alimony and child support arrearages, are nondischargeable. Others, like mortgages and car loans, are secured debts that aren’t directly part of the bankruptcy process. Before filing bankruptcy, make sure you understand which debts will be discharged at the end, and what you’ll still have to pay to avoid falling behind and starting the collections process over again.
Get Bankruptcy Tips from Your Attorney on Which Debts to Pay First
While you can’t give preference to some unsecured creditors over others, there are still strategies you can use to put more of your limited resources toward secured and nondischargeable debts during your Chapter 13 repayment plan. Before filing for bankruptcy, you should talk to your attorney and go through all your debts (even the ones that won’t be discharged). That way you’ll get bankruptcy tips to help you put your money where it will be most effective.
Don’t Put Your Inheritance at Risk
Filing for bankruptcy can affect your right to receive inheritances (money or property) while the case is pending. If you file for a Chapter 7 bankruptcy, your inherited property may be liquidated and sold to satisfy your creditors. Under a Chapter 13, any regular trust payments you receive may be applied to your debt repayment plan. Talk to your attorney about any inheritance that is ongoing or likely to come up during the bankruptcy process, so you don’t put your inheritance at risk.
Selling Your Home? Wait Until After the Bankruptcy is Over
Connecticut’s homestead exemption protects the equity in your home up to $250,000, up to $500,000 if your home is owned jointly with your spouse, effective against debts incurred on or after October 1st, 2021. Pending litigation will decide whether these amounts are also effective against debts incurred prior to that date. But if you sell your home shortly before or after filing for bankruptcy you could put that equity at risk. Since a Chapter 7 bankruptcy distributes your assets at the time of filing, if you have already sold your home and have the proceeds in your bank account, they could be considered part of your bankruptcy estate. If you don’t have more than $250,000 in equity in your home, you may be better off waiting to sell your home until the bankruptcy is over.
Time Your Bankruptcy Filing to Avoid Tax Season
For the same reasons, it’s a good idea to time your bankruptcy filing to avoid tax season, at least if you expect to receive a refund. The Bankruptcy Trustee can seize your tax return from the IRS and apply it to your debts as part of the bankruptcy process. It may be better to file first or wait until you have received your refund and spent it on ordinary expenses (like health care or rent) before filing your bankruptcy petition.
Cash in Hand Won’t Help You When Filing for Bankruptcy
Some people like to keep significant amounts of cash in hand, either in bank accounts or in physical bills stored in their homes. This sometimes stems from a family or cultural distrust of banks and governments. Other times, it is a matter of convenience. In any case, having cash in hand won’t help you save your assets when filing for bankruptcy. You will need to disclose everything, even the shoebox of money stored in your attic, as part of the bankruptcy petition.
Don’t Try to Hide Assets from the Bankruptcy Trustee
Similarly, you should not transfer your assets to children or friends in the days leading up to your bankruptcy. Some people do this because if it is not technically theirs, they believe their creditors won’t be able to get to it. Unfortunately, just like with personal loans, if you transfer property out of your name to hide those assets from the bankruptcy trustee, you run the risk of it being “clawed back” into the bankruptcy estate anyway.
Get More Bankruptcy Tips in a Personal Consultation
Bankruptcy tips can help you make smarter decisions before filing your bankruptcy petition, but they are no substitute for the personal legal advice you can get from a bankruptcy attorney. At Lawrence & Jurkiewicz, we focus our practice on helping people. We will meet with you to review your financial circumstances and help you decide whether to file for a Chapter 7 or Chapter 13 bankruptcy, and give you personalized tips for filing bankruptcy in a way that maximizes the benefit for you and your family. Please call (860) 264-1551 or contact us for a free consultation.