|Listen to what an experienced bankruptcy attorney advises and NOT what your friends, relatives, or co-workers are telling you about your debt situation. While this sounds like common sense, many people tend to cling onto false beliefs (obtained from non-experts) which guides their actions in the WRONG direction.|
Below is a list of what you typically should AVOID doing prior to filing for bankruptcy because these kinds of actions might result in undesirable consequences:
- Do not drain your retirement accounts to pay credit card bills. This is because you're allowed to keep retirement funds in a bankruptcy. If you waste the money to pay debts, you lose retirement funds to a debt you COULD have written off.
- Don't have more in your bank account, on the day of filing for bankruptcy, than what your exemptions entitle you to take. A lawyer can help you figure out your entitlements regarding exemptions.
- Beware of filing, when you are owed a substantial tax refund, because the trustee could take it to pay your creditors if you don't have and use the appropriate exemption. Again, a lawyer can help figure this out.
- Beware of filing when someone owes you money because the trustee could collect that money and pay it to your creditors. For example, if you are due money in a law suit, the trustee could take over the case and give the money to the creditors.
- Do not pay a relative (or friend) significant amounts of money (more than about $400) within the year prior to filing bankruptcy. If you do, the Trustee might contact the relative and require them to pay it back to the Court to pay your creditors. For the same reason, don't drain your savings to pay a relative’s bills for the same reason.
- Do not transfer any assets out of your name prior to filing bankruptcy prior to speaking with a lawyer first.
- Do not pay any unsecured creditor more than $600 in the 90 days before filing bankruptcy prior to speaking with a lawyer.
- Do not incur debt once you have seriously considered bankruptcy as an option. This can have consequences.
- Avoid putting charges on credit cards 90 days before filing bankruptcy. If you do, talk to a lawyer.
- Do not file if you are anticipating an inheritance within the next year. Talk to a lawyer.
- Do not file if you are intending to sell your real estate soon.
- The new bankruptcy law is five hundred (500) pages long, extremely complex and adds a tremendous level of complexity to the filing of personal bankruptcy petitions.
- The bankruptcy court clerks and trustees do not provide you with any legal counsel regardless of whether you made a mistake or not.
- It is likely that you will make mistakes since this is not your area of expertise.
- You might miss taking exemptions which will cost you money that would have otherwise been exempted.
- There are certain pre-filing requirements that must be satisfied or else the bankruptcy petition will be dismissed. You might not obtain a discharge if you make particular errors. As one example, the Bankruptcy Trustee must be provided with the debtor's prior year tax return as well as pay stubs (or income affidavit) for the 60 day period prior to the filing.
- Many debtors must calculate a means test. This calculation is typically complicated to a non-attorney. It is a 6-page calculation, similar to preparing a complicated tax return, which attorneys calculate using bankruptcy software. If you don't pass the means test, you cannot file a chapter 7 bankruptcy. It is all too easy, for a non-lawyer, to make a mistake on the means test figures.
- If a bankruptcy petition is dismissed and re-filed, the automatic stay will remain in effect for only 30 days following dismissal. The debtor needs to make a motion to continue the automatic stay and this motion must be both filed and heard by a Judge within that 30 day period. If a bankruptcy petition is dismissed twice then the automatic stay will not be applicable following the second dismissal.
As you can see, there are many things to avoid.
Because so much is at stake, you should retain a bankruptcy lawyer.