Mistakes To Avoid Before Filing for Bankruptcy
If you are in a difficult financial situation because of debts, bankruptcy can help change the situation. Bankruptcy can allow you to eliminate or re-arrange your debts. However, to ensure a successful bankruptcy case, you need to be careful about the actions you take before and after filing for bankruptcy. There are some moves that can hurt your bankruptcy case. It is crucial that you avoid making mistakes that can hurt your bankruptcy case and your ability to get the fresh financial start you want and need. Below, we share some mistakes to avoid before filing for bankruptcy.
Mistake #1: Transferring Property or Money
Many people are afraid of losing their property or money during the bankruptcy process. Often, people think that they can protect their assets by transferring them to friends or family members. However, the truth is that transferring money or property to another party before filing for bankruptcy does little to protect your assets. In fact, transferring assets to another party before declaring bankruptcy can be viewed as fraudulent. If it is determined that you transferred assets before declaring bankruptcy to protect them against inclusion in bankruptcy, your case may be dismissed, and you may face criminal charges.
Mistake #2: Paying Off Certain Creditors
If you owe your friends or family members money, you might be tempted to pay them back before declaring bankruptcy. That might seem like the right thing to do. However, although you might have good intentions, you should avoid paying back some creditors and not others. If you pay back relatives or friends within 12 months of filing your bankruptcy case, or even other creditors within 90 days of filing, it can be considered a “preferential transfer,” meaning some creditors received payment in preference over other similarly situated creditors. If you selectively repay loans, the bankruptcy trustee can file a clawback lawsuit to get back the money paid to the creditors. Once the money is collected, it will be used to repay all your creditors fairly. This process can delay your case.
Mistake #3: Incurring New Debt
If you incur new debts shortly before filing for bankruptcy, your creditors may object to the discharge or re-arrangement of your debts. They may argue that you incurred the debts fraudulently without the intention to repay. This also holds true for credit card debts.
Mistake #4: Failing to File Income Tax Returns
If you are required to file income tax returns and haven’t done so for at least two years before the time you file for bankruptcy, you will have put a halt to your bankruptcy case. You cannot complete the necessary paperwork without your returns. Additionally, without your returns, it is impossible to determine your past income and any tax liens or claims you may be subject to.
Mistake #5: Taking Out an Equity Loan Against Your Home
If you take out an equity loan against your home, it may cause problems in your bankruptcy case. You may need to explain why you took out such an equity loan and what you did with the proceeds you received. In that same line, don’t take loans against a retirement plan.
Contact Our Deerfield Beach Bankruptcy Lawyer
Another mistake to avoid before filing for bankruptcy is not consulting an attorney. Bankruptcy law is too complex for most debtors to understand on their own. To schedule a consultation with our Deerfield Beach bankruptcy lawyer at the Law office of Adam I. Skolnik, P.A., call us at 561-265-1120 or complete our online contact form.
Source:
americanbar.org/groups/business_law/resources/business-law-today/2010-march/preferences-when-can-a-trustee-claw-back-payments-to-creditors/
