With all the current economic difficulties, you can't pick up a newspaper and not read about someone filing for bankruptcy. If you're one of these in this situation, you should know that as a debtor you have rights. Remember, the bankruptcy laws protect the debtor and do not allow the bankruptcy trustee to seize all of their property and liquidate these assets to pay back the creditors. The only assets that can be sold are the non-exempt assets. It can be easily figured out what property can be protected by consulting with a bankruptcy attorney. Most bankruptcy attorneys are well versed in the exemption laws of the local district where the debtor is filing. Although the goal of becoming debt-free is admirable, using bankruptcy as the tool to do this needs to be done with much care.
Most people don't know that the minute they file for bankruptcy all of the money in their bank account becomes property of the bankruptcy estate. The bankruptcy trustee has the legal right to take this money unless it is protected by an exemption in the bankruptcy filing. Sometimes an individual's bank will try to help the bankruptcy trustee preserve the state by freezing the bank account. Even though it might be protected by an exemption, the individual filing for bankruptcy will not have access to it. When this happens there is a chance that checks could bounce and raise the actual balance in the account because the checks were never paid. This is one of those the situations where a bankruptcy attorney can be a beneficial asset in the bankruptcy petition.
It's important to plan a bankruptcy filing to work to the best advantage of the debtor. When a person is considering bankruptcy and they have money in the bank, and they have outstanding loans, it's a good idea to open a new account at a bank that's unassociated and move your money. On the bankruptcy petition the debtor is required to disclose all transactions and transfers. This will give the individual filing for bankruptcy a chance to keep some or all of their money left in the bank account based on the state exemptions. If the transfer was more than 90 days from the bankruptcy filing the bankruptcy trustee would probably decide that this was not an asset to go after. When filing for bankruptcy, the time frame many times can be beneficial to the debtor. Sometimes it is beneficial to wait because your income is too high based on the six month look back period.
Nowadays, most people have all of their finances handled at one bank. This might include a checking and savings account, credit cards, auto loans, home loans and even personal and business loans. This can create a very bad situation when this individual decides to file for bankruptcy. Creditors have the right to offset their debts when an individual has money in the bank where the credit was taken out. When a bankruptcy is filed by an individual, the bank is notified and they can take the money out of the account and apply it towards the debt. Not all banks do this without permission from the bankruptcy court, but it doesn't mean they can't. If you're considering bankruptcy and don't have a full grasp of the ins and outs of the complex financial world, it's a good idea to consult with a bankruptcy attorney in your area to make sure that there are no landmines in your future.
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