Bankruptcy Dos and Don’ts

DO NOT….

1. DO NOT transfer assets out of your name.
This raises a huge red flag. A bankruptcy trustee can undo a transfer of property that previously belonged to you.

2. DO NOT pay off a relative or “favorite” creditor.
If you pay off a relative or creditor within one year prior to the filing of a case, the trustee may make that person give back the money and distribute it to other creditors. (Link to Paying Debts After Bankruptcy)

3. DO NOT continue to use your credit cards.
Even though you’ll likely eliminate a large portion of your debt, charges for luxury goods and services of more than $500 within 90 days of filing are presumed non-dischargeable.

4. DO NOT take a cash advance.
If you take out cash advances totaling more than $925 within the 70 days prior to filing, the law presumes that the debt is non-dischargeable. You’ll have to prove to the court that you did not intend to defraud the creditor when you took out the cash advances. Even if the time period and total amount requirements are not met, a creditor can still sue you if it can prove you took the advance with the intent to defraud the creditor.

5. DO NOT fail to appear at court.
A court case continues until your bankruptcy has been filed, which occurs only after you have met with us and provided all the necessary information.

6. DO NOT hide information from your attorney.Our office can only provide advice based on information we are aware of. Failure to disclose assets can lead to the loss of those assets, fines, or imprisonment.

7. DO NOT mortgage your home to pay debt.
If you take out a second mortgage on your home, you may be converting debt which would have been discharged in bankruptcy into debt you still have to pay in order to keep your home.

8. DO NOT liquidate or take a loan your retirement account

It is important to consult an experienced bankruptcy attorney (link) before borrowing any money from your 401(k) plan. If you previously borrowed money from your 401(k), repayments on 401(k) loans are not viewed as debts in bankruptcy and are not discharged in a Chapter 7.

9. DO NOT forget to start rebuilding your immediately after discharge from bankruptcy.
Bankruptcy is the first step to getting a fresh financial start. See How to Rebuild your Credit (Link to how to rebuild your credit)

10. DO NOT leave out any creditors.
It is important that all of your creditors get notice of the bankruptcy filing.

DO…

1. DO continue to make payments on vehicles which you are intending to keep.
Creditors secured by a car or truck can usually repossess the vehicle without notice to you anytime you are in default.

2. DO ask your bankruptcy attorney questions.
Filing bankruptcy is overwhelming and difficult to understand for the average person who doesn’t deal with bankruptcies everyday. We are happy to explain the unfamiliar laws and rules of bankruptcy.

3. DO tell your attorney about liens you may have on your home or unpaid judgments.
It’s possible that we can help avoid the liens or unpaid judgments.

4. DO make your house payment.
If you plan on keeping your house through the bankruptcy process (Yes, you can keep your house (link)).

5. DO file your taxes.
The court will require at least two years of tax returns to be submitted.

6. DO close or keep minimal amount in your checking and saving accounts at any banks where you also have a credit card or line of credit.
If you stop paying on your credit card or line of credit, the bank may go into your account and use funds to pay your credit card or line of credit.

7. DO adjust the amount withheld from you pay for taxes.
It’s helpful to get as close as possible to getting no refund or owning. A tax refund is an asset in Chapter 7, and your tax withholding can affect plan payments in a Chapter 13.

8. DO remind us of a garnishment.
If you get us the name, phone number, and fax number of your payroll or bank department, we’ll fax to them proof that the bankruptcy was filed and ask that any garnishment STOP as soon as possible. It is also possible that we we may be able to retrieve all of the garnished funds. (link to garnishment page)

9. DO continue to pay child support.
Child support will not be discharged in the bankruptcy process so it’s important to continue to make your child support payments.

10. DO come up with a budget.
A sustainable budget is vital to the fresh start you will achieve by eliminating your debt via bankruptcy.

Talk to Firebaugh & Andrews after reading these bankruptcy dos and don’ts. for a free consultation 734-722-2999