Preparing for Bankruptcy

Authored By: Legal Aid Services of Oklahoma, Inc. LSC Funded


The most important thing you can do if you are considering filing for bankruptcy is talk to an attorney. However, there are some things you can do on your own to "plan" for your bankruptcy.


It is a good idea not to use your credit cards for at least 90 days before you file for bankruptcy. If you continue to use your credit cards with the intention of filing bankruptcy, you may not be able to discharge the debt AND you could be charged with fraud.


It may be difficult to do, but you should NOT PAY any bills that are unsecured if you are seriously considering bankruptcy. That means do not pay credit card bills, medical bills, signature loans or any other debts that are unsecured. However, student loans are not dischargeable and you should continue to pay them IF you can do so without taking money from your basic living expenses (see info below). Your first priority should be to pay your mortgage, car payment, utility bills and grocery expenses. If you are behind on your mortgage payment, try to work with the creditor to catch it up. Take the money you would be spending on your credit card payments and put it towards your house payment.


When you file for bankruptcy, you must list every debt that you have, even those that you would like to keep. Most people want to keep their "secured" debts, like a home or a car. If you want to keep a debt after filing for bankruptcy, you will need to sign a "Reaffirmation Agreement" with the creditor. A "Reaffirmation Agreement" is a signed agreement that will be filed in your bankruptcy case, which tells the court that you and your creditor agree that the debt will not be discharged and you get to keep the collateral as long as you continue to make payments. Most creditors require that your payments be current BEFORE they will agree to provide you with a Reaffirmation Agreement. You will need to think carefully about the debts that you may want to keep. High interest secured debts, like for furniture, are not good debts to reaffirm on. If you choose not to keep a secured debt, YOU WILL HAVE TO RETURN THE SECURED ITEM TO THE CREDITOR! For example, if you have a loan for a Kirby Vacuum Cleaner, that loan is secured by the vacuum cleaner and if you decide you do not want to pay, you will have to give the creditor the vacuum cleaner. If you are going to file for a bankruptcy and if you have a secured debt that you do not want to keep, you probably should discontinue paying that debt. The creditor may repossess the property or ask you to return it, however you can discharge the debt in bankruptcy.


Student loans are usually non-dischargeable in a bankruptcy so if it is difficult for you to pay them, the best solution is to try and work out an income sensitive payment plan with the loan holder. If that is not possible, you may be able to seek a hardship exemption. They are very hard to get and you may need the assistance of an attorney to get one. Usually, only individuals who have become disabled are able to successfully obtain a hardship exemption.

Updated 3/16/04

Last Review and Update: Oct 03, 2002

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