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Top 9 Moves You SHOULDN’T Make Before You File Bankruptcy!

We are continuing our talk about bankruptcy for the month of August. If you have already spoken with a licensed attorney and decided to file bankruptcy, there are some things you should NOT do in order to make the process easier.

We wrote an earlier article on the types of bankruptcy that are available.You should start there if you are new to the process.

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1. Don’t use your credit.

Generally, you do not want to charge up credit cards to buy items simply because you know you are going to file bankruptcy. The law would call this purchase being done under “false pretenses.” Of course, they would have to prove that you purchased the item under false pretenses (with intentions not to pay), therefore there is an objective standard:

If you purchase an item in excess of $550 for a luxury item that is not required for the welfare or health of your family, you will still have to pay for it because it would be considered “non-dischargeable.”

2. Don’t pay money you owe to family and friends.

Avoid paying your family and friends any loans you may owe them. Unfortunately, the court looks at your family and friends as creditors. Under the eyes of the law, you cannot choose to pay some creditors and not others under you own order of preference. They will have to wait in line with the rest of your creditors. Even if you pay them back, the court can reverse the payment.

3. Don’t allow your property to get taken.

Usually there are ways to keep your major assets, such as your car and home. However, if you allow your car to be repossessed or a foreclosure sale to take place, a bankruptcy filing cannot get these assets back. Be sure to take the proper action and hire an attorney before something like this happens.

4. Don’t transfer property out of your name.

The bankruptcy trustee can go back as far as FOUR years before bankruptcy filing to recover property you transfered out of your name. Be careful that you are not transferring as a way to evade filing bankruptcy on certain pieces of property/assets.

5. Don’t hide property or facts from your bankruptcy lawyer.

Your attorney will need to know as much information as possible to effectively represent you. The last thing they (and you) need is for them to be surprised by something you chose not to tell them. The bankruptcy court can and will find out if you are hiding something.

6. Don’t use your retirement to pay credit card bills.

Fortunately, your retirement accounts are not subject to the bankruptcy. If you use it to pay your credit cards bills, the money is now subject to the bankruptcy. You need the money in your retirement account, so make sure you keep it for that reason – retirement.

7. Don’t pay debts that can be discharged in bankruptcy.

Since these debts will be discharged at the conclusion of the bankruptcy anyway, you are giving away money.

8. Don’t forget to file your taxes.

Some taxes are non-dischargeable, so make sure you file your taxes and know how much you owe (if any). Either way, the bankruptcy court is going to force you to file the taxes, so you should go ahead and file even if you know you will owe. SOMETIMES, taxes can be discharged as well.

9. Don’t forget to explore other options outside of bankruptcy.

There may be other options for you. Bankruptcy may not be the answer. There are ways to consolidate your debt, or perhaps you just need a personal financial coach to teach you how to manage your money more effectively.

Your health is more important than paying debts, so remember to take action on your situation quickly before your finances begin to have an affect on other aspects of your life. Have you ever had to file bankruptcy before? Would you recommend it to others?

As always, this is by no means legal advice, and we urge you to talk to a licensed attorney before making any decisions about your specific situation.