7 MISTAKES TO AVOID PRIOR TO FILING BANKRUPTCY
1. THE CREDIT CARD RUN-UP MISTAKE:
Don’t use your credit cards once you have made your decision to file bankruptcy. Consumer debts incurred for luxury goods and services owed to a single creditor in excess of $600.00 within 90 days of filing are presumed to be nondischargeable and may be found to be due and owing.
Cash advances of more than $875.00 within 70 days of filing are presumed to be nondischargeable and may be found to be due and owing.
Don’t jeopardize your "fresh start" by running up your credit cards.
2. THE REPAY A FAMILY MEMBER MISTAKE:
With regard to repaying debts, you cannot treat your family member any better than you would an ordinary creditor. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member or business insider within two years prior to filing bankruptcy. After your bankruptcy is over and discharged you are free to pay back anyone you wish.
3. THE LIQUIDATE YOUR RETIREMENT ACCOUNT MISTAKE:
Retirement accounts are generally protected. You can eliminate your debt and keep whatever you have in an ERISA qualified account, free and clear. Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.
4. THE TRANSFER PROPERTY OUT OF YOUR NAME MISTAKE:
A bankruptcy trustee can undo a transfer of property that previously belonged to you. This can occur if the transfer was made within up to 4 years of the filing of the bankruptcy if the transfer was to an insider or was with the intent to hinder, delay or defraud a creditor.
Don't put your property and bankruptcy at risk by making major changes on your own. Most property can be protected through bankruptcy. You will be surprised. Equity in real estate is often protected especially if you occupy the home. Additionally, most personal property (such as cars, furniture, bank accounts and even jewelry) can be protected with the proper use of bankruptcy exemptions. Remember, most people filing for bankruptcy lose nothing but their debt.
5. THE LINE OF CREDIT/2nd MORTGAGE TO PAY DEBT MISTAKE:
Don’t take a loan against your real estate in an effort to reduce the equity. You can often file bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk. In short, don't change UNSECURED credit card debt (that could easily go away through bankruptcy) into debt that is SECURED by a line of credit or mortgage on your home.
6. THE FAILURE TO APPEAR AT COURT PROCEEDINGS MISTAKE:
If there’s a collection case pending against you in state or federal court, don’t assume that you can avoid the court process simply because you’ve decided to file bankruptcy. Until your bankruptcy case is filed, a collection case continues.
7. THE FAILURE TO TELL YOUR ATTORNEY THE TRUTH, THE WHOLE TRUTH AND NOTHING BUT THE TRUTH MISTAKE:
An attorney can only provide advice based upon information provided by the client. Failure to notify your attorney about your assets can lead to the loss of those assets, denial of your bankruptcy case, fines and in extreme cases, imprisonment. Your attorney will need to know about all of your debts, assets and income in order to fully appraise you of the benefits, as well as any risks that might be connected with your filing for bankruptcy.