Nevada Bankruptcy: Difficult Questions For A Difficult Choice

Bankruptcy is never anyone’s first choice. It is often the result of a series of bad choices or unfortunate circumstances. Nevertheless, it is a choice you should never take lightly. This article provides in-depth answers to some of the tougher questions surrounding the choice to file for bankruptcy, including:

• Who is bankruptcy for, and why it might not be for you.
• Two alternatives to bankruptcy everyone should at least consider.
• What you should do (and avoid doing) before filing for bankruptcy if you decide to do so.

Is Bankruptcy The Right Step For Anyone In Serious Debt?

Bankruptcy is not a one-size-fits-all solution. Not everyone in serious debt will be able to benefit from bankruptcy, nor will bankruptcy be the best solution for many others. A bankruptcy filing is a nuclear option that can disrupt a careful asset protection plan and place the plan or assets at risk.

By establishing forward-thinking structures and planning for businesses, estates, and assets, bankruptcy and execution by creditors may be prevented. In fact, when clients show up believing that bankruptcy is their only option, a good lawyer may say, “Do not, under any circumstances, take such a drastic step.”

When Might It Be Best To Avoid Bankruptcy?

Often, bankruptcy can cause more problems than it solves. Consider, for example, someone who has an asset protection trust set up for them.

Under most circumstances, anything in the asset protection trust is protected after just two years. However, if you file a bankruptcy, they will not be protected for 10 years. Thus, a routine legal process and an unsophisticated lawyer can cause you to lose assets that would otherwise not have been subject to judgment had you not filed for bankruptcy.

A bankruptcy filing is important for people in particular circumstances. It might be the perfect solution for a routine wage earner who has some credit card debt, some medical debt, and nothing complex about their financial situation. They would be a good case for bankruptcy, regardless of whether it is Chapter 7, 11, or 13.

For other people, however, bankruptcy is a step that only ought to be taken after considerable deliberation about their options and circumstances. Most of the time, a creditor who is exerting some pressure can be waylaid with a settlement. Doing so will give you time to arrange, with careful planning, for your assets to no longer be subject to judgment.

Anybody thinking about bankruptcy should speak to a sophisticated and specialized bankruptcy lawyer. This is especially true if their debts arise from business obligations, as opposed to consumer credit and medical bills.

How Serious Does Debt Have To Be To Consider Bankruptcy?

The right metric when considering bankruptcy is not how serious the debt is, but what kind of debt it is and whether there are other options for handling it. Another key factor is how close any particular creditor is to obtaining judgment, and therefore, how close they are to seizing control or property interest in your assets.

With consumer debt or medical debt, creditors tend to be patient and persistent. If you are about to be sued on a business obligation or if you are a business that is experiencing financial distress, those are good cases for considering bankruptcy. However, it really depends on the circumstances of that business, debt, or lawsuit.

Anyone who thinks that bankruptcy is their only option should speak to an experienced estate planning or financial business lawyer, particularly if they have business debt or some sort of overarching crisis that is separate from consumer spending.

What Alternatives To Bankruptcy Should I Be Considering?

In some states, there are state-level proceedings for the benefit of creditors that debtors can take advantage of. Sometimes, these are called ABC: an Assignment for the Benefit of Creditors. In Nevada, they are extraordinary but are not available or as strong everywhere.

The advantage of using such tools is that they make it easier for you to maintain control of the situation. They are not as public, and, depending on the nature of your creditor, sometimes it is an unfamiliar enough proceeding that you can use it to your advantage as a debtor.

You are also not inviting the federal court system and the Department of Justice into your financial life to take a look at everything you own. Such procedures are not usually the ideal solution, but they are a possibility. They are sometimes worth considering, depending on your circumstances, your debts, and your creditors.

Another alternative is settling debts through negotiation, which depends more on the disposition of your creditors and the types of debts you’ve incurred. Finally, sometimes the answer is just to do nothing and let a creditor get a judgment and then try to collect from you.

Usually, the most effective alternative to a bankruptcy filing is making sure, through good planning, that the structure of your assets and your estate are as bankruptcy and creditor-proof as possible.

What Should I Do Or Not Do Before I File For Bankruptcy?

It is significantly easier to define what you cannot do than what you should do when facing bankruptcy. You cannot rack up a bunch of new debt in preparation for your filing, as this would be seen as fraudulent and could put the entire process at risk. You should also avoid transferring a lot of assets out of your estate.

If you have a valuable ring and give it to your friend shortly before you file, with an informal understanding that they might give it back later, it could potentially land you in jail. If anything, this will make your bankruptcy much riskier. If something seems like a clever idea, then people much cleverer than you have already thought of it and no doubt written reasons not to do so into the legal system.

Technically, you can pay back your friends and family. That is neither a criminal action nor is it fraudulent. However, it will invite the bankruptcy trustee to sue the friend or family member to recover the debt that was paid to them.

As a preferential creditor, they might very well get it, and then you will have subjected the friend you thought you were helping to a lawsuit by your bankruptcy trustee. Clearly, this is also not something you should do.

If you know you are going to file bankruptcy, the best thing you can do is gather up your records and make sure your bankruptcy is as clean as possible. Your goal as a debtor should be to get through it as quickly, seamlessly, and painlessly as possible. The best way to do that is by maintaining clear records, staying within your standard of living, and not making any large purchases or anything that will attract the attention of the Department of Justice.

There are some legitimate planning goals that you can accomplish, however. For instance, paying back priority creditors is just fine because they will get paid out of the bankruptcy estate anyway, and sometimes that can be used to your benefit.

Additionally, you can do some exemption planning by making sure that the assets that you want to keep are clearly exempt. A bankruptcy lawyer can help you understand techniques you can use to maximize your exemptions.

What Happens At The End Of My Bankruptcy?

How a bankruptcy ends depends a lot on how the bankruptcy goes. In the routine “best case” case scenario, at the end of your bankruptcy, you will receive a discharge for the remainder of your debts.

The discharge is an order of the court that says your debts from before you filed are to be discharged and that no one can ever collect them from you. You will not have to pay taxes on the discharged debt either.

However, there are other possibilities for what can happen during the course of your bankruptcy, especially the longer ones like Chapter 13. If you have debts that are not subject to discharge, they will not end with your case but could end it. The debtors of those non-dischargeable debts can commence their collection activity against you, which is certainly not ideal.

Additionally, if you ran afoul of the United States trustee and/or the Department of Justice during your case, then you might not get your discharge order. If that happens, all of your creditors can then reignite their cases and their collection efforts against you.

Having a skilled attorney on your side before, during, and throughout the process can help avoid such complications. They can ensure your bankruptcy, if you choose to go through with it, goes smoothly and results in a full discharge.

For more information on Initiating a Bankruptcy Filing In Nevada, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (702) 703-1540 today.