If you or your business have found yourself with insurmountable debt, a Chapter 13 bankruptcy could be just what you need. Chapter 13 is a reorganization bankruptcy, in which detailed plans are made to pay off your creditors within three to five years. This is done by restructuring the nature of your business or lifestyle while you keep essential assets such as your car, your house, and your tools of employment. Chapter 13 can be a tremendous help if used correctly, but it is also one of the most complicated forms of bankruptcy. Here are a few things to avoid when filing Chapter 13 in Arkansas.
Don’t Run Up More Debt
It may be enticing to open up new lines of credit once you’ve decided to file for Chapter 13. This is not recommended. The court looks unfavorably on individuals who tack on extra debt before going bankrupt, especially if that debt is incurred during the last 90 days. In many cases, debt incurred immediately before filing bankruptcy is ruled non-dischargeable and will have to be paid back following the bankruptcy.
Don’t Pay Back Friends and Family
You may feel obligated to pay back the creditors who are closest to you first. Perhaps you could pay off your father-in-law just before the bankruptcy and avoid awkward Thanksgivings in the future? This is not a good move. Any large payments to any creditors a year prior to the bankruptcy may be seized and evenly redistributed by the court. All of your creditors have the right to receive some of whatever funds you have left. Imagine the awkward Thanksgivings if the government revokes your payment to your father-in-law.
Remember To Inform All Creditors and Debt Collectors
Creditors and debt collectors are legally required to stop calling you once they receive word that you have started the bankruptcy process. Don’t let them continue to bother you at home or at work.
Don’t Cash In Your Retirement Plan To Pay Bills
Remember, Chapter 13 is a form of bankruptcy that allows you to keep many of your assets. Your 401(k) and Roth IRA are protected, as are any other tax-exempt retirement plans. Don’t use that money to pay creditors before the bankruptcy has a chance to restructure your debt.
Don’t Miss Deadlines
Payments and paperwork will have strict due dates when the bankruptcy process begins. Don’t miss out on a life-changing opportunity by forgetting to keep in touch.
To help you keep in touch with your bankruptcy requirements, call the experts at Natural State Law, PLLC, at (501) 916-2878.