Sometimes difficult decisions need to be made because of unforeseen circumstances. Perhaps a loved one develops a terrible medical condition and bills from doctors and hospitals start piling up. You trim the fat off your expenses till there is nothing left to remove. Then you max out your credit cards just to keep food on the table.
You may even take out a loan to cover utilities. When a friend tells you about how filing for personal bankruptcy helped in a similar situation, you think it could be a viable solution. Before you rush in, set yourself up for success.
So, what should you not do before filing for bankruptcy?
You should not tap into any more money sources, and this includes retirement funds, credit cards, or loans. Giving away any assets is also a bad idea and could jeopardize the success of your case. Every person’s situation is unique, so talking to an experienced bankruptcy attorney is necessary when you are considering your options.
A good place to begin preparations is gathering your financial information together for your lawyer. Collect bank, tax, and income documents as well as expenditures and bills.
So, Why Should You Not Get More Credit Cards?
You may think that it would be a good idea to get more credit cards because this type of debt can be covered in your case, but if you rack up loans or credit debt knowing you will file for bankruptcy, that can be ruled as fraudulent, and you will have to pay it back.
If you think you might be filing, stop charging your cards 90 days (about 3 months) beforehand. This will show your lawyer and the court that you did not intentionally make charges or take out loans that you didn’t intend to pay. Do not tap into your retirement fund thinking it will be liquidated as part of the bankruptcy process because these funds are not touched.
During those three months, look for a credit counseling class that can help you draw up a budget you can live on that doesn’t include charge cards and personal loans. For instance, work out what your monthly finances look like if you do not have most of the medical and credit card bills that were related to the accident. You want to make sure you can get back to living within your means if your case is successful.
So, Why Should You Not Give Assets Away?
Giving your belongings away, such as a car, or transferring your property to other people can be ruled illegal and may jeopardize your case. You may be tempted to do this to show the court that you don’t have anything of value, but if you are being dishonest, it will be found out. Property always has a paper trail that the courts can look up and if you try to switch names months before filing, it will look suspicious.
There could be ways for you to keep what you need, and this should be discussed openly with your attorney.
If you have money from a lawsuit, do not give that away, either. You may think it is a good idea to use it to pay back people who have helped you out during this hardship, but it is a better idea to let the court decide. Make sure to list the money you have borrowed from friends and family so the court is aware of all debts.
Related Questions
What Types of Debt Are Not Covered with Bankruptcy?
There are many types of debt not covered by filing chapter 7 or 13 bankruptcy, and these include child support, alimony, taxes, and debts from willful personal or property injuries. A lawyer will be able to look over your documents with you and guide you through what qualifies and what doesn’t.
What are Common Types of Bankruptcy?
Chapter 7 and Chapter 13 are common types of personal bankruptcy. Chapter 7 is called a liquidation where assets are turned into cash and handled by a trustee. Chapter 13 is called a reorganization where you take an agreed amount of time to pay back some of the debts. The tips on what not to do before filing apply to both types of bankruptcy.
Summary
The decision to file for bankruptcy should not be made quickly, but if you are considering it, then do not take on any more debt or give away your property. Both can lead to an unsuccessful case. Speak with an experienced bankruptcy attorney who can guide you to the best option and help you plan a fresh start.
Hines Law is a bankruptcy law firm in Massachusetts that provides guidance and sound advice for you to choose the best solution to handle your overwhelming debt. Our bankruptcy attorneys have vast experience in navigating bankruptcy laws so that you are protected and able to rebuild your finances and life. Don’t know where to begin? Call one of our bankruptcy firm locations throughout the Boston area and schedule a Free consultation.