Don’t Rush Into Bankruptcy without evaluating your entire situation. Bankruptcy works well to wipe out the debt. However, you’re limited in how often you can do so. You can receive a Chapter 7 discharge once every 8 years however discharge under chapter 13 is less time. If you are not likely to see a financial improvement in the next 60 days, it may make sense to time the filing with when you are about to see an improvement in your situation and you have stopped going in debt.
Don’t Wait Too Long to file bankruptcy. If you are facing a foreclosure sale, y ou are facing an eviction, have a wage garnishment, a possible repossession is in your future, or your car has been repossessed, it may be in your best interest to file for bankruptcy quickly.
Don’t Drain Your Retirement Account to pay bills. You can protect most of your hard-earned retirement funds in bankruptcy. Many people make the mistake of whipping out their retirement funds to pay bills and debts that they could have avoided with bankruptcy. People can always file bankruptcy, and then tap their retirement if they have no other options.
Don’t File When You are About to Receive a lot of Money or Assets. Once you receive the money, it would become part of the bankruptcy estate. Trustees ask if you are about to receive an inheritance or a lawsuit settlement at the 341 meetings of creditors hearings. They get paid a portion of the fees recovered in a chapter 7 bankruptcy to pay other creditors. 25% of the first $5,000, 10% up to $50,000, 5% to a $1 million and 3% of everything over $1 million.
Don’t Selectively Repay Creditors. Sure, you may want to repay your Mom before filing bankruptcy, but If you pay back loans to friends or relatives within one year of filing it can be considered a “Fraudulent Transfer” The same goes for creditors that are repaid within 90 days of filing. This may be considered a “Preferential Transfer.” Fraudulent and Preferential Transfers can be reversed in a chapter 7 bankruptcy by the bankruptcy Trustee.
Don’t Provide Inaccurate, Incomplete or Dishonest Information to the Bankruptcy Trustee or on your filing. Your providing information to the court, the trustee and your creditors under the penalty of perjury. If you do not provide complete and accurate information about all of your income, assets, debt, business dealings, expenses and financial history you can get in trouble or have your case dismissed. If you knowingly misrepresent your information, such as by failing to disclose a home you own, you could be subject to criminal penalties, including fines of up to $250,000, twenty years in prison, or both. And if the asset is discovered by a chapter 7 trustee, they may sell it out from under you.
We have had clients forget to include assets on their petitions in the past, and we were allowed to amend the petitions so mistakes can be correct if they are honest mistakes.
Don’t Forget to File Taxes. You may not have the money to pay your taxes, but it is a requirement of the bankruptcy courts to be current on your filings. Income taxes greater than 3 years old can be forgiven, however, taxes needed to have been filed or the IRS needs to have known that they were due and an offer of compromise has not been excepted in the last 240 days. If you have tax issues, talk to an attorney.
Don’t Rack Up New Debt that You Have No Intention of Paying. Any debt incurred in the 70 to 90 days before filing bankruptcy may cause you trouble. However, things like necessities like food, clothing, and utilities generally do not apply.
Don’t Hide or Move Assets. People might be tempted to sell, transfer for safekeeping, or hide assets before filing bankruptcy. This is inviting trouble. The FBI investigates bankruptcy crimes. Most bankruptcy lawyers can usually help in these situations, as they see these issues all the time where people make mistakes and it becomes the attorney’s job to unwind the mistake. If you’re not sure about some transfer or other issues, talk to a bankruptcy attorney first. Free advice now, is better than paying later. Attorneys are also bound by attorney-client privilege, so your privacy is protected.