One of the hardest things to witness in a Chapter 7 bankruptcy action is the sale of your assets. It can be made even worse seeing them sold for far less than what you paid for them – or what they are worth. There is an alternative and it could be well worth discussing with a bankruptcy attorney before filing that petition.
Rather than waiting for the courts to claim and sell off your assets, try to sell them off yourself. You will normally get better prices in a private sale than creditors receive in a fire sale-auction, however, you do need to be careful how you handle the proceeds. When filing for bankruptcy, the court will look at what assets you have disposed of over the preceding 12 months. If you have disposed of a range of assets and used the proceeds for non-payment of debts, the court may well reject the bankruptcy petition.
There is nothing wrong with selling assets and paying down debt. People have done that for centuries seeing it as an alternative to bankruptcy – and can be too. If you clearly document the sale of your assets, and if you can show a clear path between the sales receipts and the payment of pressing debts, then the court will have no reason to dispute your actions.
As I mentioned, there are situations where, by using the receipts wisely, people have avoided the need to file for bankruptcy. They find that the receipts cover arrears and enable them to keep their heads above water until their circumstances change – for example, they find employment. In the long run, they often lose less in the way of their assets while those they have lost at least have delivered a fair price and helped them out of trouble.
Sometimes, jumping in first can deliver a better outcome. If you do stave off bankruptcy, you will walk away with your credit score still in reasonable shape, and no bankruptcy scar on your history.
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