Bankruptcy Do's and Don'ts
Caution: The information contained below is not intended to give legal advice to any individual. The information is extremely complex and may not apply to your particular situation. Our office strongly urges you to consult with Mr. Young before relying on any information contained herein.
Do remember to be completely honest with us and provide the documents and information requested to properly prepare your petition in bankruptcy.
After you have paid our office one half of the total legal fees, you may feel free to advise your creditors that you have retained counsel and are filing for bankruptcy. They may contact our office for verification.
Do understand that, while you may e-mail our office with questions, please leave your phone number on all correspondence to ensure that we are able to contact you promptly.
Do obtain your credit report at annualcreditreport.com since it is free. A credit score is extra, but you won’t need it now.
Do understand that it takes approximately 4 to 6 weeks after meeting with a paralegal for your petition to be completed. This time may vary depending on the amount of documents needed and how quickly you return them.
All fees and costs must be paid in full at the time you meet with a paralegal, failure to do so may result in lengthening the time it takes for your petition to be completed.
Do understand that if you a have a credit card or secured property (boat, car, etc.) at the same bank where you have a checking and/or savings account, the bank may withdraw funds from your bank accounts to cover the debts owed. Secured lines of credit may be suspended upon filing for bankruptcy even if you intend to keep your home.
Don’t pay your relatives or friends in favor of your other creditors, and don’t try to transfer property out of your name and into theirs. If you do, the bankruptcy trustee may sue them on behalf of your creditors to get the money back.
Don’t transfer any property to a relative within one year of filing your case. The Trustee may even go back five (5) years from filing the case if the transfer was for a fraudulent purpose such as avoiding paying your creditors.
Don’t take a loan against your real estate in an effort to reduce the equity. You can often file a petition in bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay a credit card debt, you may be putting your house at risk.
Don’t pay ahead or pay off balances early on secured loans (loans for which there is collateral)
Don’t pay ahead or pay off balances early on unsecured loans (personal loans, medical bills, credit cards or store cards, etc.)
Don’t attempt to sell your property for less than what it’s worth. This will not reduce the amount you have to repay - and you (or whoever you sold it to) may end up stuck with the difference.
Don’t run up your credit card debt prior to filing a bankruptcy. The court may view this as an attempt to exploit the bankruptcy system, and the judge may treat it accordingly.
Don’t buy any luxury items prior to filing bankruptcy. Any luxury items purchased within 70 days of filing for bankruptcy are viewed as non-dischargeable debt.
Don’t take any major cash advances off of credit cards prior to filing for bankruptcy. The court may suspect that you are acting in bad faith and may refuse to discharge the debt.
Don’t borrow, withdraw from or cash out your 401k, IRA, or ERISA qualified savings and retirement plans to pay bills. If you do, you may be liable for penalties and taxes that are not protected by the bankruptcy filing. If you don’t use these funds now, you may be able to use them after bankruptcy.
Don’t file if you are about to receive a tax refund or inheritance. Discuss the timing with your attorney.
Don’t transfer money into your kids’ bank accounts. They have you as a co-signor and are subject to the same review as your accounts.
Don’t get married just before filing if your spouse has high income.
Don’t misrepresent facts to your attorney, we are working to help you.
Don’t wait until after filing to purchase a vehicle. If you know you will need a more dependable car please take care of this before filing your case. Each case is different; if you need to do this please contact the attorney first.
Don’t assume that the bankruptcy will get rid of all your debts. Some tax liabilities are non-dischargeable (basically, all tax liability accrued in the three tax years prior to filing are non-dischargeable in most circumstances). Student loans are now non-dischargeable except in cases of extreme hardship.
Don’t tell your attorney that certain items of personal property do not belong to you if they really do belong to you.
Don’t expect your attorney to help you defraud the Bankruptcy Court and your creditors. Lying on your bankruptcy petition is Federal crime and the punishments include prison, fines and the likely event that your debts will not be discharged. It is not worth it!