Considering Bankruptcy? Avoid These Mistakes

I’m considering filing bankruptcy. Are there any mistakes I should avoid?

People often ask this question. It’s easy to understand why. Bankruptcy is complex.

And, there is a lot of misinformation about what happens to a person’s debts and assets when they file bankruptcy.

From questionable “asset planning” to paying back that loan from Mom just before filing bankruptcy– there are a lot of pitfalls to avoid.

These financial mistakes can make your bankruptcy less effective, or even put you at risk for committing bankruptcy fraud.

Don’t do these things just before filing bankruptcy:

  1. Don’t use your credit cards.
  2. Don’t take credit card cash advances.
  3. Don’t use credit card convenience checks.
  4. Don’t do credit card balance transfers.
  5. Don’t purchase luxury items.
  6. Don’t repay loans from friends or family members.
  7. Don’t sell any assets for below market value.
  8. Don’t transfer any assets into someone else’s name.
  9. Don’t give away anything you own.
  10. Don’t pay your child’s college tuition without first discussing with your attorney.
  11. Don’t loan money to anyone.
  12. Don’t take money out of retirement plans or 401ks without discussing with your attorney first.
  13. Don’t take out a second mortgage.
  14. Don’t gamble.
  15. Don’t open new credit accounts or loans.
  16. Don’t put money in your kids’ bank accounts or college savings plans.
  17. Don’t make major financial decisions without talking to your attorney.
  18. Don’t get married just before filing (unless this is part of an overall strategy discussed with your attorney.)
  19. Don’t fail to appear at state court hearings, trials, or proceedings.
  20. Don’t buy a new car without first discussing with your bankruptcy attorney.
  21. Here’s a surprising one: don’t pay this year’s tax bill without first discussing with your attorney. Sometimes tax debts can be useful in the bizarro world of bankruptcy.
  22. Don’t file bankruptcy if you are expecting a tax refund or inheritance UNLESS you have discussed it with your attorney.

That’s a pretty long– and sometimes strange– list.

And, most everyone has done some of the things on the list before they call our office for help.

We can help you correct these mistakes before filing your bankruptcy.

In later posts, we’ll go into detail as to why certain transactions can make your bankruptcy less effective.

Keep in mind this is a “big picture” list. There are other mistakes to avoid, and no two cases are the same. You will want to consult and attorney about your specific situation.

Give us a call at (805) 284-0760 for a free bankruptcy consultation. As part of your consultation, you and attorney Karen Ware will thoroughly discuss your individual circumstances and the mistakes you should avoid if you are considering filing bankruptcy.