Avoid Making These Mistakes if You Are About To File for Bankruptcy
When done correctly, bankruptcy can offer you a fresh financial start. On the other hand, if you don’t do things correctly, your bankruptcy case could be rejected or face challenges. Before filing for bankruptcy, you must avoid doing certain things that can ruin your chances of having your debts discharged or re-arranged.
Some people make some mistakes before filing for bankruptcy, either knowingly or unknowingly. These mistakes end up negatively affecting their efforts to have a fresh financial start. Some mistakes might seem minor, but they can be just as harmful as mistakes that seem huge. Therefore, if you are considering filing for bankruptcy, you must avoid committing any mistake that can jeopardize your bankruptcy filing efforts.
Below are four mistakes you must avoid if you are thinking of filing for bankruptcy. However, this is not an exhaustive list of mistakes you should avoid, so consult a bankruptcy attorney to learn more about other mistakes you need to avoid before filing for bankruptcy.
Avoid Favoring Some Creditors Over Others
Bankruptcy laws protect creditors from debtors who favor some creditors over others. If, for example, you pay off a family member’s or friend’s debt before filing for bankruptcy, yet other creditors remain unpaid, the bankruptcy trustee can sue the party or parties you repaid for the amount paid. Such lawsuits can be tough to deal with and can negatively affect your bankruptcy case.
Avoid Transferring Assets
Transferring assets before filing for bankruptcy can lead to bankruptcy fraud charges. Your bankruptcy case can be dismissed or rejected if the court finds you intentionally transferred assets before filing for bankruptcy. Avoid moving or transferring assets before filing for bankruptcy, and remember that bankruptcy exemption laws can help you protect your exempted property.
Avoid Obtaining New Debt
Some people take on new debt just before filing for bankruptcy, knowing they will discharge the new debt in bankruptcy the same way they will discharge old debts. Others take on new debt to pay off old debt. Regardless of your reason for wanting to take on new debt a few weeks or days before filing for bankruptcy, avoid doing so. Acquiring new debt just before filing for bankruptcy can lead to fraud charges. Creditors might accuse you of taking loans from them, knowing fully well you would discharge them in bankruptcy.
Also, do not take a loan against your real estate in an effort to reduce its equity. You can often file bankruptcy and exempt your equity. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk in addition to converting your dischargeable unsecured debt into non-dischargeable secured debt.
Liquidate your Retirement Account Mistake
Retirement accounts are generally protected by exemptions you can claim. You can eliminate your debt and usually keep whatever you have in a retirement account. Do not drain your retirement accounts in an attempt to pay down your credit card debt.
Avoid Not Consulting a Bankruptcy Attorney
This is the biggest mistake a debtor can make before filing for bankruptcy. Filing for bankruptcy is not a decision you should make alone. You need to consult a bankruptcy attorney who can help you understand which bankruptcy option is best for your situation. For example, if you are thinking of filing Chapter 7 bankruptcy, yet your monthly income does not meet the state’s median income standards, an attorney can advise you on why Chapter 13 could be a good option for you.
Contact Us for More Information and Legal Help
Need more information on the mistakes you should avoid before filing for bankruptcy or help understanding which bankruptcy option is best for you? If so, contact an experienced Lehighton & Carbon County bankruptcy attorney at the Law Office of Adam R. Weaver, Esq. today to schedule a consultation.