Analyzing Your Finances Before Filing Bankruptcy

Before you can file the bankruptcy petition, you need to assess your financial situation and gather together as much information about your income and property as possible. You will need this information to fill out the many bankruptcy forms. Figuring out exactly what property you own and how much of that property is exempt may also help you decide which bankruptcy chapter is more beneficial. In addition, by putting all this information together ahead of time, you lessen the chance of forgetting to include important property or debts on the forms.

Required forms
To file your bankruptcy you will need to complete, among others, Schedule A–Real Property, Schedule B–Personal Property and Schedule C–Property Claimed as Exempt. Schedule A details all of your real estate holdings. Schedule B details all of your personal property. Personal property is simply all property other than interests in land or buildings. Schedule C basically calls upon you to relist most of the property in Schedules A and B, specifying the state or federal law that provides the exemption, the value of the claimed exemption and the current market value of the property without deducting exemptions.

Accordingly, to complete these schedules, you must know several things:

  • What property do you actually own?
  • Is the property owned individually or in joint names?
  • What is the fair market value of the property?
  • Is the property exempt? If so, which law provides the exemption?
  • What is the value of the claimed exemption?

Information about your income
Additionally, you will need to provide the court with a schedule of your current income. If you have filed a joint bankruptcy petition with your spouse, you will need to detail both spouses’ monthly income. One of the most time-consuming chores is to prepare Schedule J–Current Expenditures of Individual Debtors. This is, essentially, a monthly household budget. Of course, if you already prepare such a calculation for your own use, then this will be an easy chore. If you have little idea where your money goes each month, you will need to sit down with your checkbook, credit card reports, bills and receipts, and piece together an acceptable explanation. Do not underestimate the amount of time that this may take.

Importance of full disclosure
It is extremely important to fully disclose all of your property and debts. Property not listed as exempt on the bankruptcy schedules may be lost, and debts that are not reported may not be discharged. In addition, there is often a court filing fee–not to mention likely attorneys’ fees–for amending the papers (adding information later). By giving incomplete or false information under oath on the bankruptcy forms, the debtor risks not only losing the discharge, but also criminal prosecution.