One of the most important things you can do as you prepare to file bankruptcy is to stay well organized and keep exact records of all your financial dealings. These documents and expenses are used by the court to determine your financial capacities and what forms of bankruptcy protection you are eligible for.  In simple terms, saving all your receipts is a must when filing for bankruptcy protection. This is because like any other area of law, a bankruptcy hearing requires evidence; evidence in the form of financial documentation.

According to the US Bankruptcy Code Section 727, a bankruptcy discharge can be denied if a debtor has “concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information” that might be used to ascertain the debtor’s financial situation and standing. In other words, the trustee is going to examine all of your assets and expenses. Failing to adequately record and document your financial transactions can create all kinds of problems in a bankruptcy case, ranging from having an expense disallowed in your budget to having your entire bankruptcy case tossed out for failing to adhere to Section 727.

While preserving receipts for all your transactions should go without mention, it happens more often than one might think. Common problems that can arise in bankruptcy filings stem from debtors paying rent with cash, to even handling smaller expenses without receipt such as childcare fees, charitable donations, and even loans. Debtors who pay rent or the nanny with cash (especially to relatives or friends) risk the appearance of “fraudulent transfer” which if suspected can be disastrous on a bankruptcy hearing.

The best practice in any situation, but especially leading up to bankruptcy is to collect receipts for all your expenses, large or small, and let the trustee determine which are meaningful. Always create documentation for loans, even if the loan came from a family member. Otherwise the loan could be included as monthly income and affect your means test score. Keep copies off all your bank statements as well, and be sure to provide all your receipts and financial documents to your bankruptcy attorney prior to the filing date. And of course, if you are unsure about whether or not to include an expense or receipt consult with your attorney beforehand.

In summary: Make sure to put everything in writing before filing for bankruptcy.

For many consumers looking to bankruptcy credits cards are more than just a luxury, they are a means of living. Many people in financial turmoil rely on credit cards and cash advances to help keep the electricity on and food on the table. If you are considering filing bankruptcy one question you may have already begun to ask yourself is, “Can I continue to use my credit cards?”

The answer is laid out in U.S. Bankruptcy Code §523(c) which states:

(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable;

§523 goes on to clarify luxury goods as excluding “goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.” In simple terms, what the code states is that any debts to one creditor totaling $500 or more, and taking place within 90 of the bankruptcy filing are nondischargeable. Even charges the consumer may see as essential can be deemed nondischargeable if the creditor can prove the debt was incurred with the intent to never pay the amount back. Furthermore the term “luxury goods” has often been argued in bankruptcy court to include a variety of charges including clothing, electronics, travel and entertainment expenses among others. Determining what does or does not qualify as a luxury good is ultimately in the hands of the Court.

In response to §523 a good bankruptcy attorney will generally advise a client to immediately stop using credits cards for any purchases after first consulting with the attorney and to wait a minimum of 3 months (90 days) before filing bankruptcy. Waiting the full 90 days where feasible greatly reduces the chances the trustee or a creditor will file an objection. If you are considering bankruptcy or in the process of filing bankruptcy it is important to keep your attorney educated on any credit card purchases and provide your attorney with a comprehensive list of your purchases and credit card transactions prior to filing.

In today’s society, bankruptcy is not uncommon.  In fact, even some of the largest businesses are filing for bankruptcy.  Blockbuster, which has been around for many years, announced that they are filing a Chapter 11 bankruptcy.  According to  http://www.bloomberg.com/news/2010-09-23/blockbuster-video-rental-chain-files-for-bankruptcy-protection.html, Blockbuster Inc., which is the world’s biggest movie-rental company, filed for bankruptcy after failing to adapt its storefront model to online technology pioneered by rivals such as Netflix Inc. 

            What is a Chapter 11 bankruptcy?  According to  http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter11.aspx, a case filed under Chapter 11 of the U.S. Bankruptcy Code is frequently referred to as a “reorganization” bankruptcy. 

            According to http://www.bloomberg.com/news/2010-09-27/blockbuster-wins-court-approval-to-pay-studios-claims-for-movies-games.html, Blockbuster Inc. won interim court approval to pay as much as $40.4 million to studios to maintain the supply of movies.  Blockbuster can pay $28 million owed to Sony Pictures Home Entertainment Inc., Twentieth Century Fox Home Entertainment LLC and Warner Home Video, U.S. Bankruptcy Judge Burton Lifland in Manhattan said at a court hearing today. Those studios negotiated trade agreements with Blockbuster in March in which they received security interests in Blockbuster’s Canadian assets.  Blockbuster can pay other studios that negotiate agreements as much as $12.4 million, under Lifland’s order. 

            There are many different bankruptcy options for debtors.  A debtor must determine what bankruptcy option is best for them and their financial situation.  The best thing a debtor can do is to meet with an attorney and discuss their options.  Many law firms have discounted consultations.  This allows a debtor to come into an attorney’s office to discuss their situation with the attorney and not get stuck paying high attorney fees.  Every person’s situation is different so it is best that a person contact an attorney if they find themselves in financial troubles.