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How To Decide Whether And When To File For Bankruptcy

If I Do Decide To File Bankruptcy, When Should I Do It?

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Unless you're facing an emergency or a cutoff of an essential service, don't rush into bankruptcy.

If you're expecting a big medical bill or some other big bill, incur it BEFORE you file for bankruptcy. Only debts that exist before you file can be included. As long as the bill is not for a luxury, it will be included in your dischargeable debts.

Before you file, consider settling the debts of any creditors you'll need additional services from, such as your doctor. However, if you don't do this at least 90 days before filing your bankruptcy, the Trustee could treat the payment as a "preference." A Trustee can get the money back from your creditor to pay out among all your creditors as the court decrees. (If the creditor is an "insider" such as a family member, the trustee can recapture payments made to insiders for up to a year prior to the filing date.) Once you've filed bankruptcy, you'll have no control over who gets paid what and in what order.

Before filing for bankruptcy, try to keep a credit card or two free of debt. If there's no balance on your account when you file, the credit card company won't be contacted. Since the company won't be aware of the bankruptcy or, if it does become aware of it, won't be involved, it may not close the account.

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