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Ten Don’ts When Filing for Bankruptcy

Filing for bankruptcy could provide great financial relief for the honest debtor. However, there are checks in place to ensure that relief is provided to those who truly cannot otherwise stay afloat. That being said, there are critical mistakes you should avoid in order to qualify for filing bankruptcy.  If you cannot avoid doing one of the things listed below, you should let your qualified bankruptcy attorney know so that they can decide how best to proceed.

1. DON’T go on a shopping spree. Using credit, incurring debt and spending what little money you have left can only cause problems in a bankruptcy case.
2. DON’T incur any additional debt or borrow money. Keep your expenses at a minimum so that you can give a realistic picture on your petition. Do not borrow money from family or friends without speaking with your attorney about the possible consequences and reasons.
3. DON’T loan or give money to friends and family, especially with intent of liquidating or hiding your assets before filing a bankruptcy case. While it is acceptable to give your spouse grocery money, do not transfer or move large sums from your bank account into anyone else’s. If you have done this, you will need to discuss with your bankruptcy attorney so that the matter can be addressed as a part of your bankruptcy case.
4. DON’T sell or give away your property or other assets before filing bankruptcy. The trustee or your creditors may allege that you were trying to hide assets to defraud creditors. If you have done this, discuss with your bankruptcy attorney so that the matter can be addressed as a part of your bankruptcy case.
5. DON’T transfer automobile titles. People frequently get worried they will lose a car as a part of filing a bankruptcy case. This fear is usually unfounded, and the transferring of a car to another person before filing bankruptcy can only make the situation worse. For example, once a car is transferred to another person no bankruptcy exemptions can be applied to the equity in the car. And the bankruptcy trustee can easily discover transfers of cars in a case and you are required to disclose this information on your bankruptcy petition.
6.DON’T leave anything off of the paperwork; you should be completely honest and provide all of the necessary documentation to support your petition. The bankruptcy petition is signed by the filer in several places affirming its accuracy.
7. DON’T leave creditors off of the paperwork because you want to keep a credit card or do not want someone to know you have filed. It has been our experience that leaving creditors off of bankruptcy petitions is a frequent source of problems during a bankruptcy case and even years afterwards.
8. DON’T continue to bank where you owe money without discussing with your attorney. While it is usually not a problem, sometimes it could result in your account being frozen by the bank once they learn you have filed bankruptcy.
9. DON’T lie – this includes withholding the truth. Tell your attorney everything up front; this will help your case in the end. Withholding information from your bankruptcy attorneys prevents her or him from filing your case in a way to mitigate the issues.
10. DON’T borrow from or withdraw 401k, IRA, and ERISA qualified savings and retirement plans to pay creditors. Most qualified retirement and savings plans are protected in a bankruptcy case and can be preserved in a bankruptcy case while the creditors are discharged.