I received an email from a client recently asking if she needed to be “broke” before filing bankruptcy. I have never been asked this question before, and I am surprised, because it is a very good question. The Bankruptcy Code doesn’t require you to be insolvent in order to be eligible to file bankruptcy. Actually, the opposite is true. The Code allows you to select exemptions which can be used to protect your property. These exemptions may protect equity in your house, your cars, household goods, retirement accounts, and many other types of assets. You may even be able to protect the money in your bank accounts.
Because of your ability to exempt property in bankruptcy, you should consider filing bankruptcy earlier than later. What I mean is, the moment you realize that you are not going to be able to repay your debt you should stop making payments to your unsecured creditors (credit cards, unsecured personal loans, etc.) and contact a bankruptcy attorney. If you continue to make payments to these creditors you are throwing your money away. You don’t have to keep making payments until you have no more money left before filing bankruptcy. In most situations a bankruptcy attorney can protect your property from liquidation and still get you relief from your debt.
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