Many debtors ask about what they should do before filing bankruptcy; but what about the things that debtors shouldn’t do before filing bankruptcy?
Below is a list of things debtors should avoid before filing bankruptcy:
- Don’t raid your retirement account in an attempt to repay debtors if you are considering bankruptcy. A matter of fact, don’t raid your retirement account before bankruptcy for any reason, including the need to pay rent or a mortgage. If it is the rent/mortgage money you need, consider borrowing from family letting them know that it may not be repaid because of a possible bankruptcy filing. Because retirement accounts are exempt from creditor seizure during bankruptcy, it is a wise decision for debtors to not withdraw that money. Once the retirement money is withdrawn creditors may be able to access it via bankruptcy.
- Don’t abandon your home before filing bankruptcy if you want to save it from foreclosure using bankruptcy. Leaving your home before filing bankruptcy may cause you to lose your homestead exemption and thus lose your ability to save your home in bankruptcy. Please speak with your bankruptcy attorney about how you can save your home from foreclosure during bankruptcy.
- Do not ignore credit card lawsuits before filing bankruptcy. If a credit card company sues you and is able to win a default judgment because you ignored the lawsuit, they may be able to seize assets via bank account seizures and wage garnishments before you file bankruptcy. Under certain circumstances you may be able to recover some or all of those assets; but there is no reason to take the risk that you won’t. Respond to all lawsuits against you.
- Do not give away cash or property to family and friends before filing bankruptcy. Many debtors make the mistake of thinking they can have family and friends safeguard assets while they are in bankruptcy; but this is illegal. If you have unwittingly transferred assets before filing bankruptcy, speak with your bankruptcy attorney to find out how you can correct this error.