How to Prepare for Bankruptcy

Merchants and businessmen in 16th century Italy used to seat themselves on benches or "bancus" and conduct their business. If one of them became unable to pay his debts, his bench was broken or "ruptus," as a form of public embarrassment. The two words, Latin in origin, combine to create the term "bankruptcy."

Instructions

1. Stop using credit cards. Consult an attorney before taking on additional debt and discuss which debts to pay

2. Ask the attorney how to distribute any available funds. Consider first mortgage or rent, car payments, insurance, food and gas.

3. Organize the documentation of all indebtedness. Place all most recent credit card statements, original promissory notes, title policies, insurance policies, notices of default and related paperwork in a file. Include any correspondence from creditors or collection agencies.

4. Gather all documents necessary for the bankruptcy. Collect copies of utility and other regular bills, car and house payments, a lease and information regarding other debt.

5. Group together copies pay stubs and income tax information. Have a record of payments made, including bank statements, cancelled checks or money orders.

6. Make a list, including phone numbers, addresses and contacts of all creditors. Include information about the last contact, method of contact (letter, phone) and the name of the part representing the creditor.

7. Create a post-bankruptcy budget. Learn from past mistakes. Consider the bankruptcy a fresh start.

Tips & Warnings

• Seek the advice of counsel before transferring property or making any gifts, which could be seen as a "fraudulent conveyance" and disqualify the petition for bankruptcy.

• Understand that any attempt to borrow money prior to bankruptcy, could negate the filing.