If you are about to file bankruptcy, there are many mistakes you should avoid before filing. Although it is impossible to describe every mistake in this article, we will discuss some of the biggest mistakes to avoid here. Remember, bankruptcy filings should always be done through attorney representation. Even if you read this general-information article, you will not be equipped to understand all the nuances of bankruptcy law. You will still need an attorney.
1. Transferring or Hiding Assets
Assets transferred in anticipation of filing bankruptcy may be recovered by the bankruptcy trustee in a Chapter 7 as a fraudulent transfer. Assets hidden during the bankruptcy process are simply fraud. It is important to be very truthful and straightforward during the bankruptcy process. If you do not transfer assets and tell the truth, then your attorney many times can protect your property through the bankruptcy exemptions or other proper and correct bankruptcy planning.
2. Repaying Family Members, Friends, or Business Associates before Filing
Do not pay back an “insider” such as a family member, friend, or business associate any time within one year of filing for bankruptcy. If you pay back any such “insider,” then the bankruptcy trustee can reverse these “preference” payments. This means that either you will be forced to repay the trustee the money or they will go after your family member or friend.
3. Having Your Name on Someone Else’s Property
Regardless of the reason, having your name on someone else’s property can sometimes be a huge mistake in bankruptcy. Even if your family member has added your name to a home or bank account simply for “estate” or “convenience” purposes, you may still be considered to be a 50% owner of such house or account. Is your name on your elderly mother’s house? Then, you are 50% owner any may not be able to protect the house during bankruptcy.
4. Large Credit Card Use before Bankruptcy
Do not charge more than $1000 on any single credit card within 90 days before you file your bankruptcy case. In fact, if you are even considering bankruptcy, you should use no credit cards at all. Without the intent to repay your credit card, any credit card usage is fraud. The court will presume that you were committing fraud on any credit card usage that occurred within 90 days before the bankruptcy case was filed.
5. Not Obeying the Rules of the Court, Trustee, or your Attorney
The court gives absolutely no “wiggle room” on this: you must obey the rules of the court, the trustee, and your attorney. If you do not attempt debt relief through the bankruptcy system legitimately, then you will find yourself in a world of trouble. You could lose assets needlessly, be required to produce higher levels of documentation, or could even lose your bankruptcy discharge (the forgiveness of your debts). If you go too far, you can even be held in contempt of court or be prosecuted by the Department of Justice for fraud. Although the bankruptcy system is welcoming and accommodating, you must follow ALL the rules.