Six Common Mistakes To Avoid Before Filing For Bankruptcy
If you are contemplating filing bankruptcy, don’t torpedo your fresh start by making the following mistakes:
1. Don’t Run Up Your Credit Cards
Once you have decided to file bankruptcy, stop using your credit cards. If you charge more than $600 in luxury goods or services on any single credit card within the 90 days before you file bankruptcy, the court may order you to pay off those charges after you file. The court may also order you to pay back cash advances that total more than $900 if you take those advances during the 70 days prior to filing. Don’t jeopardize your “fresh start” by running up your credit cards.
2. Don’t Repay Family Members
If you pay a family member more than $1,000 during the year before you file bankruptcy, the bankruptcy trustee will be able to sue that family member for a like amount of money. The more you pay your family member, the more likely it is that the trustee will sue. The trustee will, after taking a commission, distribute the money equally amongst your other creditors. Don’t jeopardize your “fresh start” by angering your family members.
3. Don’t Withdraw Money From Your Retirement Account
Retirement accounts are generally protected from your creditors’ claims. When you file bankruptcy, you can usually keep all the money that you have in your retirement account up to $1 million. Once you withdraw the money from your account, however, it is no longer protected from your creditors’ claims. You may have to turn over that money to the trustee who will distribute it equally amongst your unsecured creditors. Don’t jeopardize your “fresh start” by depleting your retirement savings.
4. Don’t Transfer Property Out Of Your Name
A bankruptcy trustee can undo transfers of real estate or personal property made within four years of the day you file bankruptcy if you transferred the property with the intent to hinder, delay or defraud your creditors. The trustee can also undo transfers if you did not receive a fair price for the property.
5. Don’t Mortgage Your Home To Pay Off Debt
Do not take a loan against your real estate in an effort to reduce your debt without first seeking the advice of a bankruptcy attorney. A bankruptcy attorney will be able to tell you whether you can keep your home when you file bankruptcy. In most cases, debtors are able to keep their homes. If you can keep your home, you will be better served to get rid of your debt in bankruptcy than to burden yourself with a second mortgage that you may be unable to pay.
6. Don’t Hide Anything From Your Attorney
An attorney will give you advice based upon the information you disclose to your attorney. Your attorney is there to protect your interests. If you do not answer your attorney’s questions truthfully, you could lose assets, be denied a bankruptcy discharge, or even go to prison.