If you intend to file for bankruptcy, these are 5 important tips before filing:
1. Do talk to an attorney…
The bankruptcy laws have become so complex that consumers should not attempt to file by themselves. It’s a very risky process to try to do on your own. Since 2005, there is a complicated ‘Means Test’ required, government-approved credit counseling, as well as other changes which made the filing of Bankruptcy much more complicated. Also, exemption laws are complex, and failure to properly exempt an asset may result in Trustee to take possession, and sell your non-exempt asset, to pay off creditors.
2. Do tell your lawyer every asset you own, or debts you owe…
Your lawyer will be in a better position to protect you, and your rights, if he or she knows the entire picture of your finances, your assets, and your creditors. Omitting important facts from your lawyer will only hurt you.
3. Don’t pay off debts to family members…
If you owe a family member more than $600 and pay them back in the twelve months prior to your bankruptcy filing, the bankruptcy trustee can go and get that money back from your family member and pay your creditors… If your family member can’t or won’t turn it over, the trustee can use the power of the bankruptcy court to compel them to turn it over.
4. Don’t pay your credit card bills…
If you intend to file for bankruptcy, paying your credit cards is waste of your money. Many debtors continue to pay at least one credit card, thinking they want to keep that card after they file for bankruptcy. Most credit card companies however, are notified from various sources about you filing for bankruptcy, and they will cut your credit line, or as more commonly, close your credit card. So, if you are thinking about continuing to pay one credit card in the hopes that you get to keep that card, think again. But don’t worry, after your bankruptcy is discharged, you can start rebuilding your credit. I always suggest to my clients to apply for a secured credit card, and you can use the secured credit card to rebuild your credit.
5. Don’t transfer assets out of your name…
If you would really like to keep your car and you decide to transfer it into your cousin’s name before you file your bankruptcy case, the trustee can and is likely to go after your cousin to get that car. All transfers (whether sold or gifted) within the prior to 2 years must be disclosed. If you fail to disclose assets you transferred to a loved one, the trustee can sue you and your loved one to set aside the transfer, and you will end up spending considerable sum of money in legal fees to protect your interest.
6. Don’t hide your assets…
Most bankruptcy fraud cases filed involve someone trying to hide personal assets or business assets. This type of fraud in bankruptcy occurs when a person intentionally does not list all of his personal or business assets in the bankruptcy petition and schedules that he files with the court. By omitting some assets, the debtor hopes that the trustee will not discover, and therefore won’t liquidate and sell the property. However, failure to list assets is a crime, and is investigated by FBI, United States Attorneys Office and United States Trustee’s Office.
For more information, and overview of bankruptcy, please read our page on Bankruptcy Overview.