Avoid These Mistakes Before Filing for Bankruptcy
Uncertainty looms during the COVID-19 pandemic. The economy has seen better days and the need for financial relief is skyrocketing. Once landlords begin demanding back rent and creditors resume harsh collection activity, millions will be scrambling for debt relief and rapid solutions.
Chapter 7 Bankruptcy has been a coveted means to obtaining debt resolution in a quick manner. The process can be completed in less than four months and it can be painless with the help of a bankruptcy attorney. Moreover, the debtors filing for bankruptcy often don’t have to sell any of their possessions to obtain a bankruptcy discharge. It’s also worth noting that many jurisdictions are allowing the entire process to be done without the debtor leaving the comfort of home during COVID-19.
As a bankruptcy attorney, I’ve seen many debtors make the Chapter 7 bankruptcy process more difficult than necessary. As a result of greed, ignorance, and misunderstandings, there are a number of mistakes debtors can make before filing.
If you are thinking of filing for bankruptcy, these are a few mistakes you want to avoid:
- Don’t run up your credit cards.
Incurring debt with the intention of filing bankruptcy is considered bankruptcy fraud.
I was once on a vacation and met a woman who was boasting how she planned to charge her entire trip to her credit card and file for bankruptcy. “It doesn’t matter how much I spend,” she exclaimed. “I’m filing for bankruptcy after this.” Don’t be this woman.
- Don’t apply for new credit cards.
If you plan to file for Chapter 7 bankruptcy, don’t obtain new loans or credit cards; in fact, don’t even apply for them. Even if you apply for more credit without the intention of using it, such an act can be considered bankruptcy fraud if you intend to file for bankruptcy.
- Don’t sell or give away valuable property to family members and friends.
Although most states allow you to protect many of your assets, some debtors think they can protect their most valuable property by selling it or giving it away to family and friends prior to bankruptcy. This is a big no no.
I’ve seen debtors attempt to place their homes in the name of their brother or sister prior to filing. A bankruptcy trustee can perceive this act as an attempt to hide one’s assets. With enough evidence, the bankruptcy trustee can “avoid the transfer” and force the property to return back to you. Once it returns back to you, the bankruptcy trustee can take it.
- Don’t hide your money by removing it from the bank.
Again, many states will allow debtors to protect certain assets, including funds held in their bank accounts. Nevertheless, some debtors may panic and withdraw their savings in hopes the trustee won’t notice. However, bankruptcy trustees are wise to this tactic and often request to view your previous bank statements for this very reason. You don’t want to be forced to explain a random $17,000 withdrawal a week before you filed your bankruptcy petition.
By avoiding these simple mistakes, debtors can help ensure their bankruptcy process is smooth sailing. When in doubt, be sure to contact a bankruptcy lawyer. Good luck and stay safe during these challenging times.
Thanks to our friends from T.L. Brown Law for their insight into bankruptcy.