Pre-Bankruptcy Planning: Keep More Property. Ditch More Debt.

Pre-Bankruptcy planning is probably the most crucial part of any bankruptcy case. Done right, you will keep more property, erase more debt and get your case wrapped up quicker with fewer hiccups.

1. Talk to a Bankruptcy Lawyer

Don't kid yourself. You probably have no idea of what you're getting into. Nobody does, that's why 90% of personal, consumer bankruptcy cases are represented by an attorney. The bankruptcy laws, process and hearings are not to be handled by a layperson. Even the bankruptcy court strongly urges every petitioner to have qualified legal representation. They don't need their court calendar filled up with amateurs trying to fumble their way through a complicated legal process, and they won't give you any slack if you screw it up, they'll just dismiss your case and move on.

Obviously getting the cash together to pay a lawyer to take your case is not the easiest thing when your facing bankruptcy, but you do have options. If you know you're going to file for bankruptcy, then you will have a lot of opportunities to skip payments on unsecured debts that will be erased anyway. Talk to a bankruptcy lawyer to find out how you can get the legal fees together as part of your bankruptcy plan.

2. Do Not Try to Hide Property

Too many bankruptcy petitioners try to deceive the trustee by giving property away to a family member or friend in an attempt to keep it out of the bankruptcy estate. This is a bad idea. As you go through the filing process, you are petitioning under oath that all of your information has been completely and honestly reported.

If you get caught trying to transfer assets in a fraudulent way, not only will your case be thrown out, but you may face criminal charges. It's simply not worth the risk to try and defraud the court, they really don't like that.

3. Summarize Your Property Against Your Exemptions

Check out schedule B of the bankruptcy petition. It is essentially a categorized form that allows you to group all of your personal property into several categories. These categories also match up, more or less, with the exemptions available to you.

Use this schedule, not the one you'll be filing, as a way to get all of your property organized, valued and accounted for. Then add up the total value of each category and check it against the exemptions available in your state (and federal exemptions if you have the option).

This will give you a good idea of how much of your personal property is protected by exemptions.

4. Use Options to Transfer Non-Exempt Property to Exempt Property

In some cases, you may have a great deal of unused exemption money in one category that can be utilized by "transferring" your assets from non-exempt property to exempt property. One common way this is done is by selling non-exempt assets and putting the cash toward your homes equity.

Since the homestead exemption is usually the largest, your equity is protected to a much larger amount than other exemptions. By selling non-exempt property and putting the proceeds into your home, you are effectively "sheltering" assets that might otherwise be liquidated.

But Be Careful! Anything you do prior to filing for bankruptcy will be scrutinized by the court and trustee, so make sure you avoid anything that can be flagged as potential bankruptcy fraud. Your lawyer should advise you regarding this strategy.

5. Figure Out What Bills Can Be Ignored

One of the most liberating things about knowing your going to be protected by bankruptcy, is having the opportunity to tell some of your creditors to "shove it." The same credit card companies that have been charging your nearly illegal interest rates and ridiculous late fees are now on the receiving end. If you know the debt is going to be discharged, you can just ignore the bills.

Obviously, their is some debt you should stay on top of, especially if their is property securing it that you want to keep. For example, you probably want to keep a car, so make sure you make the payment. Similarly, you want the lights on and a roof over your head, so keep up on rent/mortgage and utility bills.

However, if you have a car that you probably shouldn't have bought in the first place, then you can probably just let it go. If it get's repossessed, so be it.

6. When You Should File

While you may want to postpone the bankruptcy filing to save up some cash by skipping out on unsecured debts, sooner or later, you're going to get seriously harassed by creditors. If any of them threatens to sue, or place a lien, then you should probably start the process. Alternatively, if you have any of your wages garnished or otherwise are getting money taken from you, filing will stop all of that.

If you are facing a forclosure and want to keep your home and get rid of some of the principle, then youy attorney will probably advise you to use chapter 13 to get a lower payment as well as force your lender to modify the loan.

Ultimately, your attorney will be the one telling you when to file and how to make the most of your case, so make sure you have a lawyer that will be dedicated to ensuring the most effective and successful case.