When you file bankruptcy, your biggest priority should be righting your financial situation in order to get back on your feet. While much of your income will go directly towards paying off your debts in bankruptcy, you should do what you can to save. Whether or not you will be able to save money during bankruptcy depends on the type of bankruptcy you are filing for and a few other factors.
For individuals filing for Chapter 7 bankruptcy, you will most likely be left with little in the way of savings. This form of bankruptcy, called liquidation bankruptcy, includes the acquisition of property, funds, and other assets as a way to pay off mounting debts. In most cases, this will include much of your checking and/or savings accounts.
Saving money while filing Chapter 7 bankruptcy is very unlike for this reason. When you file Chapter 7 you mush state how much money you have in your accounts, and most of it will be claimed, though recently earned money will typically remain yours. So, once Chapter 7 bankruptcy is over, it will be much like starting anew, both without debt and without much of an established savings acount. However, because some of your newly earned money will remain yours, starting a new savings plan after Chapter 7 bankruptcy has been completed should be doable.
If you filed for Chapter 13 bankruptcy, saving money can be a bit more complicated. Chapter 13 bankruptcy takes anywhere from 3-5 years, whereas Chapter 7 often takes only a matter of months. And, individuals who file Chapter 13 commit to a payment plan to pay back a portion of their debt. So, because these payments are required, if a portion of the bankrupt person’s income is put into their savings, it may look suspicious. Ideally, in Chapter 13 bankruptcy the maximum amount is paid towards the creditors, so there should not be “extra” income available to be put into a savings account. However, there are allowances for certain situations. In most cases, it is not objectionable for the bankrupt person to put some money aside to prepare for emergencies, though this should be a small amount in relation to the person’s income and the amount being paid to the creditors.
If you are currently in bankruptcy or are about to file, our firm can help. We provide specialized services to help you save money and time when filing for bankruptcy, and we can answer your questions regarding savings in your particular situation.
To get started, contact Justice Cafe, By the Manely Firm PC to speak with our Georgia attorneys.