Filing for bankruptcy is just the first step in reclaiming your financial well-being, and the simple act of filing isn’t a guarantee that the court will approve the bankruptcy and discharge your debts. Not only is it a good idea to seek guidance and assistance from a lawyer when you file for bankruptcy, but it’s also essential to avoid certain behaviors before you submit your paperwork.
The court won’t look favorably on certain behaviors, omissions, or mistakes made on your paperwork. You may find it difficult to complete your bankruptcy application if the court denies your first attempt. Filing multiple times can also become an expensive process, which can become burdensome if you’re already experiencing difficult financial problems where bankruptcy is the only solution.
Here are a few things you should avoid before you file for bankruptcy.
Avoid Creating New Debt Before Filing for Bankruptcy
One of the reasons individuals and families file for bankruptcy is because of large debts that don’t seem to go away no matter what the family tries. In the months before a family, couple, or individual files for bankruptcy, it’s important to avoid applying for new credit, racking up additional debt, or getting any further into debt with current accounts.
Legal resource website Nolo suggests:
“As a general rule, if you took out cash advances of up to $875 within 70 days before filing bankruptcy, then you may be denied a discharge on that debt. If, however, the cash advance was in the form of a payday loan where you were on a cycle of payday advances and repayment, then you may have some relief.”
While it’s essential to avoid creating new debt in the months before you file for bankruptcy, there is a gray area where some debts might not cause the court to deny your application. Inquiring with a lawyer is the best way to figure out whether you can file for bankruptcy at the present time or whether you may need to wait for a few months.
Don’t Move Your Assets or Transfer Them to Keep them “Safe”
Different types of bankruptcy allow you to keep different possessions and assets, and the court may decide you qualify for Chapter 7 bankruptcy, which is a liquidation of assets or Chapter 13 bankruptcy, which features a payment plan based on your ability to pay.
If you have an account or possession you don’t want to lose during bankruptcy it’s important that you don’t attempt to hide, sell, or transfer that item or account before you file. The court will want to use your assets to pay your debts, and giving an asset to a family member or friend for safekeeping while you undergo bankruptcy may result in the court denying your application.
Bankrate reveals three “missteps” people often make with property before filing for bankruptcy:
- Transferring the property out of your name before filing for bankruptcy
- Selling the property to a family member for less than fair market value
- Filing for bankruptcy and failing to list the property
Not surprisingly, omitting information about assets or selling the property to a friend in the hopes you can one day reclaim the property aren’t actions looked upon favorably by bankruptcy judges and trustees.
Don’t Prioritize Certain Debts Before Filing for Bankruptcy
During a bankruptcy proceeding, the court will apply your assets to the payment of your debts in an equitable manner. It’s important to avoid treating any of your creditors in a preferential manner before bankruptcy because the court may actually undo your payments so as to ensure each creditor receives an equal share of payments during the bankruptcy process.
For example, if you owe a family member money and pay them back right before you file for bankruptcy and let other debts become overdue and unpaid, the bankruptcy court can actually sue your family member to get the money back so that the court can use the funds to pay each of your creditors equally.
Do You Need Advice on Filing for Bankruptcy?
Are you in deep financial trouble? Are you at risk of losing your home? Are creditors calling you every moment of the day? You may wish to file for bankruptcy. Would you like to know how the legal team of Suburban Legal Group PC can help? Request a Free No Obligation Legal Evaluation today, and we’ll let you know your options and whether bankruptcy is the right step for you.
DISCLAIMER: All information on this website is provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.
