The actions an individual takes leading up to filing bankruptcy can drastically affect his ability to get a "fresh start." By avoiding these seven mistakes, one can travel successfully through the bankruptcy process without any bumps in the road.
- THE USE OF CREDIT CARDS BEFORE FILING: Don't use your credit cards once you have made your decision to file bankruptcy. Charges for luxury goods and services owed to a single creditor, totaling to more than $500.00 within 90 days of filing, are presumed nondischargeable and may be found to be due and owing. Cash advances totaling more than $750.00 for all creditors within 70 days of filing are also presumed nondischargeable and may be found to be due and owing. Don't jeopardize your "fresh start" by running up your credit cards.
- REPAYMENT OF A FAMILY MEMBER BEFORE FILING: You cannot treat your family member any better than you would an ordinary creditor with regard to repaying debts. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy, although amounts under $2,000 are generally too small to bother with.
- DIPPING INTO A 401K PLAN TO REPAY CREDITORS BEFORE FILING: Retirement accounts are generally protected. You can eliminate your debt and usually keep whatever you have in a retirement account, free and clear. Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.
- TRANSFERRING PROPERTY FOR LESS THAN WHAT IT IS WORTH BEFORE FILING: A bankruptcy trustee can undo a transfer of property that previously belonged to you. This can occur if the transfer was made within four years of the filing of the bankruptcy with the intent to hinder, delay or defraud a creditor, or simply if a fair price was not received.
- BORROWING FROM A SECOND MORTGAGE TO PAY OFF CREDIT CARD DEBT BEFORE FILING: 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.
- FAILING TO SHOW UP FOR COURT: Do not assume that you can avoid a lawsuit simply because you've decided to file bankruptcy. A collection case continues until your bankruptcy case is actually filed, which occurs only after all the fees are paid, you have met with us and provided all the necessary information for preparing the 40 pages of bankruptcy forms, you have reviewed, signed, and returned the forms to us for filing with the Bankruptcy Court, and you have completed the required debt counseling program (by telephone or Internet) which we coordinate for you.
- FAILING 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, imprisonment or all of the above.