Do’s and Don’ts for Filing Bankruptcy
I enjoy looking around on the web and reading what other lawyers have to say. Just today I came across a list of DO’s and DON’Ts for filing bankruptcy by Carmen Dellutri, a well-respected bankruptcy attorney in the state of Florida. The interesting thing about bankruptcy law is that it is Federal law, which means, with certain variations, the rules and procedures in each state are pretty much the same. Read on:
THINGS THAT ARE OK TO DO IF YOU ARE THINKING ABOUT FILING BANKRUPTCY
- Do take the bankruptcy court seriously, and avoid making any financial decisions that may make your creditors suspect you of filing in bad faith.
- Do seek an attorney before you file any papers, and learn your rights and options under the United States bankruptcy code. Call or e-mail us today and we will answer any questions that you may have.
- Do maintain timely payments on any collateralized loans that you wish to keep the collateral for. In other words, if you have a mortgage or car payment and you intend to keep the house or car, you must remain current on the payment. (Please alert us if you are not current on a collateralized loan at the time we are preparing your case for filing.)
- Do file your tax returns. Even if you know that you owe the IRS a lot of money, it is still important to file your taxes in a timely fashion. Not filing will only exacerbate the problem.
- Do be honest and forthcoming on your bankruptcy petition. Even if it is embarrassing, it is important that your attorney knows. Any creditors not listed on your petition may not be discharged.
- Do keep our office up to date with your contact information. Mailing address, phone and email.
- Do consider increasing your 401K contribution if you have excess income and you are filing a Chapter 13.
THINGS NOT TO DO IF YOU INTEND TO FILE BANKRUPTCY
- 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 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 eventually 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 for 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, you are very likely to have them to draw on 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 in to your kid’s bank accounts. They have you as a co-signer and are subject to the same review as your bank 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 that 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, it won’t happen.
- Don’t lie you will be signing the bankruptcy papers under penalty of perjury.