Below is a list of common mistakes debtors make prior to filing a bankruptcy case:
TRANSFERRING PROPERTY OUT OF THEIR NAMES
Many people transfer property out of their names just prior to filing bankruptcy believing that if they do not own the property at the time of filing, it cannot be taken from them. This is not true. The trustee will sue the person receiving the property in order to get the property back. This may be true for any property transferred within the 4-year period prior to filing. Any gift to a friend or relative will also be treated this way.
REPAYING RELATIVES
You are not permitted to treat your friends or relatives any differently than other creditors. If you receive a tax refund just prior to filing and give it all to your mother to repay a personal loan, the trustee will sue her to recover the money she received and disburse it to all creditors.
INCURRING DEBT THEY DO NOT INTEND TO REPAY
It is illegal to incur additional debt that you do not intend to repay when you are contemplating bankruptcy. In fact, it is a crime. So do not use your credit cards or incur other debt you do not intend to repay once you have made your decision to file bankruptcy.
TAKING MONEY OUT OF RETIREMENT ACCOUNTS
Retirement accounts are safe from the bankruptcy trustee. You will be able to cancel your debt in bankruptcy without giving up your retirement account, so do not take money out of it to pay debts. You are just shoveling money into a black hole.
BORROWING AGAINST A LINE OF CREDIT OR TAKING OUT A SECOND MORTGAGE TO PAY DEBT
Do not borrow against a line of credit secured with your home or take out a second mortgage to pay your debt. Some people believe they must eliminate any equity in their homes in order to discharge debt in bankruptcy without putting their homes at risk. In many case, this is not true. In fact, you may be putting your home at risk by incurring mortgage debt.
ALLOWING CREDITORS TO OBTAIN JUDGMENTS
If there's a collection case pending against you, don't assume that you can avoid the court process simply because you've decided to file bankruptcy. Until your bankruptcy case is filed, a collection case continues.
LYING TO OR MISLEADING THE ATTORNEY
We are your advocates. But we can only provide advice based upon the information you provide. Failure to notify us about your assets can lead to the loss of those assets, denial of your bankruptcy case, fines, imprisonment or all of the above.
