Preparing to file bankruptcy can be a lengthy process for some people. The decisions you make or don’t make can have a very significant impact on the success of your bankruptcy case. Certain conduct, seeming innocent decisions, and miscellaneous financial transactions can have a lasting negative impact on your bankruptcy filing. Here are some of the more common mistakes to avoid when planning to file for personal bankruptcy.
Do Not Incur New Debts
A creditor may try to protest your discharge if at any point in the 70 to 90 days before you file for bankruptcy. The reason being that you knowingly accrued more debt with the intent of not paying back and that the newly acquired debt should not be discharged. It can be seen as fraud. It is also strongly advised to not take out any cashes advances within 70 before filing for bankruptcy because that debt may not be discharged. However, if the cash advance was a payday loan that is on a cycle, there may be an exception.
Also, if within 90 days of filing for bankruptcy you purchased an item considered to be luxurious that is valued at over $600 with a credit card, you may be denied that debt discharge on the basis that you purchased it knowing you could not repay the debt. It is also advised to take out any loans against any of your retirement plans or an equity line of credit against your home. If you do need to use a credit card, make sure it is solely for necessities of life, like housing or food. It is recommended that avoid any credit cards and use your debit card instead. Also, do not deposit any money into your account that is not your income. This will only serve to raise questions and confuse the bankruptcy trustee as to what your “real” income is.
Do Not Give Untruthful Information
You are required to provide truthful and accurate information on your bankruptcy petition about your financial situation. This includes detailed information about your income, assets, expenses and debts. Also, when you file for bankruptcy and attend a meeting with the Trustee (341 hearing) upon which you will be sworn in and have to testify to the truthfulness and accuracy of your bankruptcy petition filed with the court. Failure to give to honest and exact information can lead criminal prosecution against you since you are giving the information under penalty of perjury. It is recommended that you take the providing of information for your bankruptcy petition very seriously and treat it with great importance.
Be sure to provide all the information that is requested and not leave any spaces or boxes blank on the paperwork. If you do leave something blank, whether it was intentional or not, it could take some time to correct it, there may be some additional fees to amend the paperwork and refile it. For example, if you forget to include a creditor that debt may not be discharged or if you forget to include an asset the court appointed trustee may believe that you did so intentionally with fraudulent intentions. In some cases, filing the wrong paperwork or not submitting it in its entirety may lead to the court dismissing your bankruptcy case. The court and bankruptcy trustees are very experienced in seeing complete and accurate bankruptcy petitions versus ones that are rushed through and haphazardly filed, and they will treat each case accordingly.
Do Not Fail To File Tax Returns Without Good Reason
The court may be inclined to dismiss your bankruptcy case if you not filed income tax returns for at least two (2) years before you initially filed for bankruptcy. The reason being that is extremely difficult to determine you past and current financial income, assets, or any tax obligations you may have if you do not have any current tax returns filed. You will not be able to move forward with your bankruptcy unless and until your tax returns are filed. While this is rare, it is best to try to catch up your tax returns if possible before filing bankruptcy. The court requires the most recent copy of your last filed bankruptcy petition to be given to the trustee upon the filing of your case. So if you are planning to file bankruptcy, at a minium you will need to locate a complete copy of your most recent filed IRS Federal tax return and provide a copy to your attorney.
Do Not Move and/or Transfer Assets
It is recommend that you do not hand over any of assets to anyone with the intent of hiding it from your creditors since you are required to list all of your assets at the time of filing for bankruptcy. Doing so may lead to a dismissal of your case and even criminal penalties. In addition, assets that would normally be protected in a bankruptcy petition, do not have any protection from being collected, sold and liquidated by the bankruptcy trustee if fraudulent transferred. It is common for a person to sell some of their property in an effort to pay off a creditor, that itself is not a wrong action. However, at the time of your filing and when the trustee examines it you will be asked if you have recently (1 year or more) transferred any of your assets. If you did and you received money in exchange for it, the trustee will ask what you did with that money. If you have recently paid one of your creditors before filing, the trustee may try to get that money back.
Do Not Engage in Selective Loan Repayment
A preferential transfer can be a loan paid back to a person within one year of filing or repayment to a creditor within 90 days. While filing for bankruptcy, these transfers can be undone. The court appointed trustee can file to have that money that was paid to be returned so it can be distributed equally to the other creditors you owe, this is known as an adversarial proceeding. This might not be a big issue for the filer if it is against a creditor, but know that you have selectively paid off loans to family and friends, they may be asked to disgorge the funds back to the court to redistribute to your other creditors.
Do Not Wait Too Long to File
Odds are that your creditors do not know that you are intending to file for bankruptcy. If any of your creditors have taken action against you they may be attempting to collect your debt by means of repossessing your car, foreclosing your home or garnishing your wager, among other things. It is advised that you do not turn a blind eye to the creditors, inform them of your decisions to file bankruptcy because in some situations any assets that the creditor confiscated may be returned to you after filing for bankruptcy but the process of getting your property back may be a difficult legal situation that could cause a lot of stress that could be avoided.
Also, if you own real property, you do not want to wait until your creditors have judgment against you to file bankruptcy. This is because judgments can easily become liens against your real property (homes, land), and can be difficult if not impossible to remove. In rare cases, a judgment lien may actually remove enough equity from a home or other real property that the trustee will not take interest in the real property. In any instance, it is best to speak with an experienced attorney as soon as possible to discuss these issues if you are thinking about filing bankruptcy.
Do Not file Your Case When You Are About to Receive Money or Assets
It is advised that you reconsider filing for bankruptcy if you are poised to receive a large tax refund, lawsuit settlement, loan repayment or about to receive a substantial inheritance. The newly obtained money could be used to settle any debts you have on your own without having to go through strain of filing for bankruptcy. You usually be asked about this in your meeting with the bankruptcy trustee while you are under oath. Also, any significant assets that you may receive within 180 days of filing a bankruptcy case should be disclosed to the court. However, you should note that these newly acquired assets could be at risk of liquidation if you do not have enough available asset exemptions.
However, You Should Talk With an Experienced Bankruptcy Attorney
There are some exceptions to the advice above. And there are many other factors to consider before filing bankruptcy. So it is imperative that someone contemplating the filing of a bankruptcy speak with an attorney in advance. Please call our office at 770-609-1247 to speak with an experienced bankruptcy attorney. Contact >