If you are thinking bankruptcy might be an option for you, there are a few important things to remember in order to avoid hurting your chances of a successful bankruptcy:
- File your tax returns. Even if you fear owing too much money, if you had income requiring you to file tax returns, they must be filed in order to smoothly process your bankruptcy petition.
- DO NOT PAY OFF DEBTS. Many people make the mistake of paying down credit card debts or large loans just before they go to the attorney for a bankruptcy. Any unusual paydowns or large payments to creditors of over $600.00 total during the 90 days prior to filing bankruptcy could cause some problems.
- DO NOT INCREASE YOUR DEBTS. Likewise, many people feel that since they’re going to file bankruptcy, they might as well go on a spending binge ringing up large credit purchases. Debts of over $500.00 to any creditor within 90 days of filing or cash advances of more than $750 within 70 days of filing may actually be non-dischargeable and you will be stuck with that debt regardless of the bankruptcy.
- DO NOT TRANSFER MONEY. The Trustee and the court will be looking at your financial history prior to filing for bankruptcy. If you have a large amount of money in the bank, don’t think that simply transferring the money to a relative or third party under the idea that you are “paying off a loan” or “I owed them the money” will get rid of the cash. Make sure you consult with a bankruptcy attorney prior to making any such financial decisions because they could harm your chances at a bankruptcy.
- Keep your retirement account. Most retirement accounts are protected in bankruptcy. But once you liquidate a retirement account and turn it into cash, it could be used to pay creditors or, simply ruin your chance to file for bankruptcy. Don’t touch the retirement account without consulting a lawyer first.
- Keep property in your name. The bankruptcy process allows for the Trustee and the court to look back as far as 2 years on property transfers and undo the transfer if it wasn’t for value. Don’t think you can just give your property away to prepare for a bankruptcy.
- PAY ATTENTION TO COURT DATES. You may be involved in collection lawsuits while you’re contemplating filing for bankruptcy. Make sure you appear and protect yourself from judgments in these suits as best you can prior to filing. If you can fend off judgments prior to
filing, you will ensure that those debts are discharged through a successful bankruptcy, but also ensure that if, for some reason, your bankruptcy fails, you still have the opportunity to defend and/or settle these suits prior to judgment. To many people assume they will be successfully discharged, neglect the lawsuits, allow judgments and only find out too late that bankruptcy is not an option. At that point, the judgments are there to stay. Moreover, most collection actions proceed from Judgment to citation proceedings during which your appearance will
be mandated by the court. Your failure to attend when ordered could result in your arrest. Collection proceedings do not stop until the bankruptcy is filed.