COMMON (PRE) BANKRUPTCY MISTAKES THAT SHOULD BE AVOIDED:
1.DON'T run up your credit cards or take out cash advances.
Many consumers think that since their debts are going to be discharged, it doesn't matter how much they charge today. Big mistake! Certain debts incurred within 90 days before filing for bankruptcy are presumed to be non-dischargeable. That means that if you use your credit cards recklessly before bankruptcy, you may find yourself obligated to pay those charges.
2.DON'T transfer property out of your name.
Some people think they can protect property like homes, cars, jewelry and cash by giving it to a family member before filing bankruptcy. A bankruptcy trustee may be able to reverse a transfer of property if it was made in an attempt to hide assets from your creditors. It's often unnecessary, anyway, since exemptions may protect property like your home, your automobile and your wedding rings.
3.DON'T cash in your retirement account unnecessarily.
Most retirement funds in qualified ERISA accounts are protected, and you may be able to discharge your debts and keep your retirement account. Don't liquidate in an attempt to reduce assets-or gut your retirement account in a futile attempt to catch up bills that you can't get under control.
4.DON'T ignore pending lawsuits.
Many debtors assume that if they're planning to file bankruptcy, it's not important to respond to or appear in court for pending lawsuits. Until your bankruptcy case is filed, any pending legal action will continue to move forward, and it's important that you protect your rights--and protect your property from liens--until a stay from the bankruptcy court takes over. Any attorney you hire will also be interested in the content of those lawsuits and whether they include potentially "non-dischargeable" claims.
5.DON'T pay back loans to friends and family while neglecting your other creditors.
In bankruptcy, you can't choose to treat one creditor better than another. All creditors are entitled to a proportionate share of whatever funds are available to pay your debts. In fact, if you've made payments to a family member within a year before filing bankruptcy, the bankruptcy trustee may be able to take action to recover that money from your family member and distribute it proportionately among all of your creditors.
6.DON'T withhold information from your lawyer.
Often, clients think they have good reasons for concealing information from their attorneys. You may think that your lawyer won't understand your situation, or that by keeping quiet about an asset or an account, you'll be able to keep more. Lack of information will tie your attorney's hands and create serious risks. You could lose assets, have your bankruptcy case dismissed, or even face criminal charges. And, your attorney may withdraw from your case if you're dishonest with him. Only with complete information can your attorney effectively protect your interests.
EVEN IF YOU ARE NOT INTERESTED in hiring a lawyer, at least sit down for a few minutes with an attorney for a free or modest fee consultation (different lawyers have different policies on “free consultations”).The little amount of information you may obtain concerning such subjects as what and how much property can be protected (exemptions), whether you have any eligibility issues (means test or debt limits), or whether you have any procedural complications (recent move, new address) will more often than not save you a great deal of frustration, regret and grief later on. Please feel free to call and inquire as to my firm policy on free consultations.
Gerald Spala October, 2010
Copyright, 2014, Gerald A. Spala, Esq. All rights reserved. The materials and opinions contained herein are not intended as legal advice, nor should be relied upon as legal advice in the absence of a complete and thorough consultation or review of your matter by a licensed attorney Disclaimer and Warning: The law is a dynamic field. Many of the propositions and much of the content discussed in the individual articles have been or could have been seriously affected by subsequently dated events, decisions or statutory changes. No liabilities, warranties or guarantees, express or implied, as to the accuracy of the content, can be assumed, nor are intended to be conveyed, suggested or communicated by the content of any of the articles. In line with the earlier warning, the reader is urged to exercise caution, and to otherwise verify the current accuracy or applicability of any statements with a licensed attorney familiar with their facts, transaction, or inquiry.