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Common Mistakes Before Bankruptcy

Posted By admin || 17-Aug-2009

Follow this advice if bankruptcy might be on the horizon.

If you are considering filing for bankruptcy in the near future, you should make sure that you do not make pre-filing mistakes.  Many people repeat these mistakes, because they are trying to make honest efforts to get their financial situation in order.  The unfortunate part is that some of your attempts to make things better end up making things worse.

The first thing people often do is run up their credit card bills prior to filing.  The people, who know a little about bankruptcy, but not enough, end up doing this.  The thought is that credit card debt is unsecured debt, so it will be eliminated after bankruptcy anyway.  The truth is some debt made within ninety days of filing is considered non-dischargeable.  Bankruptcy filing is therefore delayed, or the money has to be paid back.

Another common mistake is that people raid their retirement accounts to try and pay back debts.  People have good intentions when doing this, but the reality is most people get to keep their retirement accounts after bankruptcy, because the accounts are considered exempt.

A third gigantic mistake is to try and repay friends or family members before other creditors.  If you make such payments within a year of filing for bankruptcy, the trustee can conclude that you made a preference, and as a result the trustee can try to recover the money from whoever you paid.  Just imagine trying to explain that to your family member.

Also, under no circumstances should you ignore pending lawsuits.  Your bankruptcy might help you with certain things (not criminal cases), but until the bankruptcy is filed, any pending judgments, lawsuits, liens, or anything similar can have immediate consequences against you.  This means place a priority on taking care of any such issues.

Sometimes bankruptcy candidates also run into trouble by transferring assets prior to filing.  There are two reasons you might consider doing this.  One is if you have an asset that you feel like isn't really yours, so you want to protect it.  An example of this would be if you were put on your parents' bank account, but never really considered it yours.  The second transfer situation you should avoid is when you try to transfer something that is yours, in order to protect it.  This would be like the transfer of a property to a relative, so that it can't be taken away.  The main thing for you to understand here is that in most cases the items that you would be transferring would be exempt anyway.

Finally, not being honest with your bankruptcy lawyer is a huge mistake.  They are there to help you, and the best way that they can help is if you are completely forthcoming with them.  Most of the mistakes listed above can be dealt with by a good bankruptcy attorney.

Categories: Debt Consolidation
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