A perfect bankruptcy filing requires a full and complete accounting of the debtors’ financial situation. Unfortunately, most debtors have little or no idea of their financial situation. Debtors have a tendency to ignore their financial problems until they are sued, their wages are garnished, or their property is deep into the foreclosure process. Once those things happen, debtors need the protection that claiming bankruptcy through a Braidwood bankruptcy attorneycan provide.
Getting the proper information is important because under some chapters of bankruptcy, assets can be liquidated to pay creditors. The most commonly liquidated assets include real property with equity, financial accounts, and pending tax refunds. Undisclosed properties and properties or accounts held jointly with parents or relatives are rare but significant issues that can arise, and if not properly dealt with prior to the bankruptcy filing, can result in substantial problems. Failure to disclose an asset, a creditor, or debt can also lead to a non-dischargeability action under 11 U.S.C. §523(a)(3).
Beyond their lack of financial awareness, the next issue that often presents itself is that what debtors think they know is often wrong, under-estimated, or over-estimated. Common errors include simple things like monthly income understatement and monthly expense overstatement. You as a debtor will want to be as candid as possible with your Chapter 7 bankruptcy attorney.
Another obstacle involves debtors who are self-employed or have their own business. In the consumer bankruptcy context, business activity is viewed under a simplified profit and loss standard. Income for self-employed debtors is determined by gross receipts minus necessary business expenses.Unsophisticated debtors will generally have no idea what a profit and loss statement is, while more sophisticated debtors will confuse things like tax depreciation and their own personal draws when calculating profit and loss. In many situations, debtors that use corporations to conduct small-scale business are often co-mingled, and untangling the web of their financial operations can present further issues. I often see business owners who simply cannot keep adequate records which can affect an Illinois bankruptcy filing.
The following information is necessary to properly review and advise a client for a bankruptcy filing. This list is by no means complete, and anything of actual tangible value can be an asset in a bankruptcy filing. Household and income information such as: householdsize, income sources, including assistance and contribution from family, rental income, business income, Social Security income, and generally every other source of income.Household expenses, including rent/mortgage, property taxes, utility costs, food, clothing, medical expenses, life insurance, car payments, car insurance, and other normal monthly expenses.
Bankruptcy basics include disclosing all of your assets. Assets include: real property, including the current market value and mortgages or liens on the properties, vehicles, year, make, model, mileage; lien-holder and balance of lien, monthly payments, bank accounts, institution, balance, type of account, list of valuable personal property, antiques, collectibles, fine jewelry, furs, sporting equipment, firearms, etc.
Your Chapter 7 bankruptcy attorney will also need to know what you have in the way of other assets, such as: life insurance policies and their cash value, if applicable, retirement and other ERISA accounts: 401(k), 403(b), IRA, 529 savings plans, etc., alimony and child support arrears owed to debtors, tax refunds and other pending or contingent assets, pending or potential lawsuit proceeds: workers’ compensation, personal injury, discrimination, and any other potential legal claim that may result in the debtors being able to collect money, boats, motors, trailers, recreational vehicles, ATVs, snowmobiles etc.
Although you may have other bankruptcy options, the best option to eliminate or restructure debts include the following: general, unsecured creditors, credit cards, medical bills, unsecured lines of credit, and payday loans, debt owed to governmental units, Federal and state income tax, Social Security or unemployment benefit overpayments, and fines or penalties including parking tickets, beneficiaries of domestic support obligations, outstanding or past due spousal or child support.
Additional information can include: business information for all businesses operated within the last four years, list of all transfers of real property for the last four years, list of all large gifts or payments to friends, family members, business partners, or other insiders within the last year, list of all large payments or payments outside the ordinary course of business to any creditors within the last year.