BANKRUPTCY UPDATES

• Taking Your Credit Score from Bankrupt to Perfect 10 (May 21, 2012)
• Music Storage Website MP3Tunes.com Seeks Bankruptcy Protection (May 22, 2012)
• Book Publisher Houghton Mifflin Harcourt Files for Bankruptcy (May 17, 2012)
• Las Vegas Tycoon Lists $500 Million in Debts in Bankruptcy Filing (May 15, 2012)
• Nassau Broadcasting Sells its Assets in Bankruptcy Court (May 22, 2012)

Dos and Don'ts Before Bankruptcy

When creditors are breathing down your neck, it can be hard to make sound financial decisions. When the pressure is on, some people take drastic steps that jeopardize their future ability to eliminate debt.

If you're leaning towards filing bankruptcy to help eliminate your debts, make sure to mind your p's and q's before filing. There are certain things that the court requires you to do - and not do - in life before bankruptcy.

Things NOT to Do Before Bankruptcy

When considering the dos and don'ts before bankruptcy, avoiding actions on the "prohibited" is quite important. Why is this so? Because making poor decisions before bankruptcy may prevent you from getting debt relief.

So, here are some decisions to avoid:

• Transferring assets out of your name. This raises a huge red flag in bankruptcy court, especially if the transfer occurs right before bankruptcy. Plus, hasty asset transfers may be financially risky or even illegal.
• Using a credit card for a large cash advance. Some people decide to max out their credit cards before bankruptcy because they fear losing credit later, or because they assume the debt will be swiftly discharged. If someone does this with no intention of paying the money back, it is considered fraud and punishable by law.
• Paying off a "favorite" creditor. While banks and credit card companies can be seen as faceless entities, it's more difficult when you owe money to someone you know and see regularly. Many people going into bankruptcy try to settle debts with friends or family members as a "favor" to that person. But the court no only frowns on this practice, they may make that person give back the money so other creditors get their fair share.
• Making large purchases. Even though you may be able to eliminate debt in bankruptcy, buying expensive items outside your price range could put you in hot water.

Don't assume that bankruptcy will spare you from all foolish purchases. Before filing bankruptcy, make sound financial decisions. Rash purchases, financial sleights-of-hand, and sneaky credit tricks will usually come back to haunt you.

Things to Do Before Bankruptcy

While filing bankruptcy may help eliminate some or all of your debt, there are a few steps you may take before bankruptcy that could help ease the process:

• Set a strict monthly budget and stick to it
• Figure out the value of your key assets, including your home and car
• Learn as much as you can about the bankruptcy process
• Attend a credit counseling briefing from a certified instructor (within 180 days of filing)

Setting a strict budget could help ensure that your finances are improving before you enter bankruptcy. And by determining the value of your assets, especially your home, you'll be better prepared for the bankruptcy process.

If you'd like to connect with a local bankruptcy attorney in your area for a free consultation about the proper steps to take before filing bankruptcy, just fill out the quick case review form below.