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Five Steps for Protecting Yourself During a Bankruptcy 

Filing for bankruptcy helps thousands of Americans create a fresh start for themselves and their family members. If you decide that filing for bankruptcy is your best option, you can do a few things to protect yourself and your assets. Many people are concerned about how they will live day-to-day during the bankruptcy process. A person filing for bankruptcy may be concerned that they will have their power shut off because they cannot pay their utility bills, for example. 

Part of protecting yourself during the bankruptcy process involves understanding what assets will be exempt from bankruptcy. One of the best ways to learn about what the bankruptcy process will look like for you is to discuss your case with an experienced San Diego bankruptcy attorney.

  • Open a New Bank Account

Opening a new bank account can help you protect yourself when filing for bankruptcy. Once you file for bankruptcy, you will benefit from getting an automatic stay against your creditors. When the bankruptcy court receives your petition, they will issue an automatic stay preventing creditors from trying to collect their debt from you. However, some creditors are still legally allowed to take set off against the funds that you owe them. 

For example, banks and some savings and loan agencies can withdraw money from a deposit account like a checking or savings account. They may be able to withdraw money from your certificate of deposit or money market account as well. You should consider going to a different financial institution where you do not have any debt and opening a new account. 

You can transfer your money into that account, use it for direct deposit, and pay your bills. It is also wise to understand the limitations of bank set-offs. In California, state-chartered savings and loan setoffs are not allowed when a person’s balance of all accounts with the bank is under $1,000.

  • Stop Auto Withdrawals

As soon as you file for bankruptcy, it is wise to stop auto withdrawals from your previous unsecured debts or bank. For example, if you have an automatic credit card payment setup, you should stop them when you file for bankruptcy. Instead, you can use your new bank account for auto withdrawals and maintenance debts like your cell phone, car payment, and utility. This simple step will help you avoid the fees and penalties associated with failed transactions. When you are trying to protect yourself in bankruptcy, saving money whenever possible can help you tremendously.

  • Stop Using Your Credit Cards

The bankruptcy process will help you start fresh after discharging the large debt that you have already amassed. Do not think about bankruptcy as a way to build up a lot of debt as quickly as you can and then have it all wiped out after the bankruptcy. If you began using your credit cards and rack up more debt right before filing for bankruptcy, you could face charges for bankruptcy fraud. Credit card companies can dispute the debt that you racked up right before filing for bankruptcy. 

As a result, you may not be able to get it discharged through the bankruptcy process. For example, suppose you plan on filing for bankruptcy and decide to max out your credit cards by purchasing a vacation in the weeks or months before you file for bankruptcy. You could face serious federal fraud charges, and a dismissal of your bankruptcy.

  • Keep Some Cash on Hand for Utility Payments

Many people who filed for bankruptcy are behind on their utility payments. Your provider will not be able to try to collect the debt you owe them. However, if you have already made a deposit, your utility provider can use that deposit as a partial payment on your debt. This will still leave you behind overall for next month’s bill. The provider can ask for a new deposit. If possible, you should try to bring all of your utility bills current before you file for bankruptcy or have cash on hand to pay for them going forward.

Create a Budget Your Can Use Effectively

One of the most important steps you can take during the bankruptcy process is to create a realistic budget. The type of budget you create depends on which type of bankruptcy you are pursuing. If you are filing for chapter 13 bankruptcy, you will need to create a budget based on your monthly payment to the bankruptcy trustee. Your monthly payments into your chapter 13 bankruptcy plan will be calculated by deducting your personal and household expenses from your take-home pay. The resulting sum is your disposable income. 

Some of your disposable income can be used for discretionary spending, but if you need more disposable income to pay into your chapter 13 plan, you will need to cut back on some of your discretionary spending. The budget you come up with needs to be realistic so you can maintain making your payment for the next few years. If you are unable to make your payments, you will not be able to successfully have your debt discharged at the end of the chapter 13 plan. Creating a budget is also important if you are filing for chapter 7 bankruptcy.

  • Provide Honest and Accurate Information to the Bankruptcy Court

As you begin the process of filing for bankruptcy, it is important that you remain honest and provide accurate information to the court. You will need to provide a significant amount of information about your financial circumstances to the court. Do not try to hide assets or give your property to your friends or family members. Doing so can be considered bankruptcy fraud. It is also essential that you are honest about your expenses and income sources. Make sure you include every source of income, even if you are only working part-time or as an independent contractor. If you have questions about presenting your information to the bankruptcy court, we recommend speaking to a bankruptcy attorney.

See What Our Clients Have To Say

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Roger C.

I reached out to BLC to help assist with a chapter 7 business bankruptcy and they provided excellent guidance, advice, and support through the entire process. In my case an adversarial action was filed by one of the creditors and attorney Ahren Tiller and his staff provided sound ...arguments which prevailed. Couldn’t have found a more experienced and supportive team to represent me in a tricky situation. I would highly recommend them to anyone making the difficult but sometime necessary decision to find financial relief. Read more
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Justin R.

Like many others before and during the pandemic, life happenings caused me to be in a financial situation to warrant bankruptcy. The BLC was super professional all the way through the entire process. Right after I paid for my Bankruptcy, I got sick and had to have surgery and recovery. Then we ...were in full Pandemic mode. They were gracious to delay my filing until I was recovered and ready to file. I could not ask for more. The process was over all quick and painless for a simple Bankruptcy like mine. I feel a weight has been lifted and I can rebuild. Thank you for all your arduous work and patience, Gabriel, Ahren, and their teams are knowledgeable and efficient. Read more
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Katey Huntley

Responsive, friendly, kind, extremely easy to work with! So knowledgeable and made this entire process painless. Very grateful!

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Lynn Molina

Gabriel Hanna, Esq and the staff at BLC helped me in a very difficult time. I appreciate all the help and care they gave my case.

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Linda Cramer

I can’t say enough of how much this bankruptcy law firm helped me with my financial situation. They were all so helpful, efficient and made the difficult time and process as quick and easy as possible. I would recommend them to anyone I know and am glad to give my public recommendation as well. T...hey truly deserve a five star plus rating. Read more
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Andrea N.

I am very happy with my experience with BLC. Bankruptcy is not something anyone wants to go through, however everyone at BLC made my experience pleasant and easy. The process was explained thoroughly and I had an easy time reaching out and connecting with my attorney. Anika Renaud-Kim was my attorney ...and she was nothing short of amazing! She was very patient and generous with her time. Ms. Renaud-Kim definitely made me feel at ease and comfortable through the entire process. Read more
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Lidia Paramore

they did a great job for me, helped me anytime I needed something, my Lawyer Gabriel Hanna is the best, gave lots of confidence all the time..thanks BLC I will.always recommend you, I’m very grateful for your service!!!

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Rachael C.

When searching for information I had called a few different firms and received consults. BLC was the only one who didn’t shy away and provided answers and information during the consult. Once I agreed to move forward, they were supportive, informative, and eased my anxiety through the whole process.... I can’t recommend them enough. Read more
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Emily Martinez

AmazingI had many questions and uncertainties and the carefully explained it all and made it easy to understand. They facilitated a fast and easy process making this scary difficult thing simple

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Legal Disclaimer: The Bankruptcy Law Center is a California Licensed law firm with attorneys licensed in the state of CA, NY. Attorney Ahren Tiller is responsible for this advertisement. Bankruptcy Law Center’s principal office is located at 1230 Columbia st. Suite 850 San Diego, CA 92101. Prior results listed on this site do not depict or in any way infer a prediction or outcome.We are a debt relief agency proudly providing options to people with financial problems. View our Privacy Policy

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