The purpose of this task is to assure the court that you have not attempted to hide assets in order to protect them from being seized and liquidated to pay back creditors. Some people, in an attempt to hold on to asset, will either give it to a family member or friend with the intention of having them give it back to you once you have file bankruptcy and had your debts discharged. For example, you may own a vacation home that you don’t want to lose in the bankruptcy proceedings. So, you transfer the deed to your Uncle Joe. The goal, in your mind, is to protect this asset from being sold to pay back your creditors. There is an implicit or explicit understanding between you and your uncle that once the bankruptcy proceedings are over with, that he will deed the property back to you.

While this all sounds good, in theory – in practice, you have committed fraud in the eyes of the bankruptcy court. If discovered, the court will most likely rule this as a fraudulent transfer of assets. In this case, the likely outcome is that the asset will be seized anyway, liquidated for the creditors, and the bankruptcy dismissed. In other words, an all around loss for you. You may think that you can hide your transfer by simply responding no when asked if you have transferred any property within the last two years. However, if you do this, you have committed perjury which not only puts you at risk for a jail term but, in addition, nullifies your bankruptcy request.

If you have substantial assets that you really want to protect, the best way to handle a situation like this is to gift the asset away and then wait two years. This way no red flags will be set off when you are asked if you have transferred any assets within the past two years, because in truth you have not. Of course, not everyone can wait two years to file for bankruptcy. In this case, your best option is to try to have the asset claimed as exempt from liquidation. Depending on the state that you are filing bankruptcy in and type of property under discussion, your request may be granted. If not, you might want to reconsider whether bankruptcy is your best option.

Bankruptcy has many reputations, some people think that bankruptcy will take care of all their debts and life will be good. Some people file as often as they can, they have made it a way of life. Some people should file and don’t because of what other people will think.

Filing for Bankruptcy does not get rid of all debts. Some of those debts include but are not limited to: Alimony, Child Support, Back Taxes, Student Loans, and Fraudulent debts, and recent large purchases of more that $550 for luxury item purchased within 90 days of filing.

There are two different kinds of bankruptcy a consumer can file for Chapter 13 and Chapter 7. Chapter 7 is total liquidation it is the quickest. Federal bankruptcy laws provide a “means test” to determine eligibility. Also beginning October 17, 2005, you must obtain approved credit counseling before you can file bankruptcy. Another new federal bankruptcy requirement is that you must file any overdue tax returns within weeks of filing a Chapter 7 bankruptcy. Under Chapter 7 bankruptcy there are certain items that can be kept but have limits. There are State exemptions and Federal exemptions and rules that go with them. Another thing to consider is Chapter 7 will not fix is your credit score. If you are behind on your bills your credit may already be bad and bankruptcy cannot fix it. If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

Chapter 13 is a reorganization of debt. While many think that they will have to pay the entire amount of outstanding debt, under Chapter 13, individuals literally pay pennies on the dollar and work through a repayment plan that helps them achieve freedom from their debt in a period of between three and five years. There are many steps to filing Chapter 13. Many assets can be kept and protected under Chapter 13. Like Chapter 7 there are also qualifications that need to be met before filing Chapter 13.

There are alternatives to filing bankruptcy. Bankruptcy should be the last resort. There are many attorneys that specialize in this area. Each state has its own rules along with many federal rules and regulations. An attorney can help decide whether or not someone should or can file for bankruptcy, which kind of bankruptcy, and whether or not they are eligible.