- Don’t pay a family member on a loan in the year before you file a bankruptcy
- Don’t borrow money thinking you won’t have to pay it back
- Don’t throw away your billing statements
- Don’t cash out your retirement
- Don’t be shy
- Don’t lie to your attorney
- Don’t sell, transfer or give away property, without talking to your attorney
- Don’t delay filing
Deciding to file bankruptcy can be stressful on yourself and your family. Your attorney will help guide you through the process, but they can only do so much. Make sure to avoid the following actions when going through the bankruptcy process.
Don’t pay a family member on a loan in the year before you file a bankruptcy
If you file a Chapter 7 Bankruptcy the Trustee can seek the return of this money from your family member as a preferential transfer. If you file a Chapter 13 Bankruptcy, it can cause your chapter 13 payment to increase.
Don’t borrow money thinking you won’t have to pay it back
The creditor could argue that you did this in bad faith or you did this with the intent to defraud your creditors. This could keep your bankruptcy from being approved. You might have to pay that debt back.
Don’t throw away your billing statements
When you are overwhelmed and cannot pay your debts, it is easy to just throw the statements away. Your attorney will need to know who you owe and a good address for creditors in order to accurately give notice to your creditors.
Don’t cash out your retirement
Retirement accounts are exempt assets which are protected from creditors. Many people cash out their retirement and go through all their assets to avoid a bankruptcy. Talk to a bankruptcy attorney before you cash out your retirement. Discuss whether your plan to get rid of your debt is realistic. If you are cashing out a retirement in order to pay monthly payments or to pay only part of your debt you may end up having to file bankruptcy later, so make sure your get out of debt plan is sound by taking to a knowledgeable attorney first.
Don’t be shy
Be sure to tell your creditors, even before you file the bankruptcy, that you plan to file, particularly if you have hired an attorney to represent you. Many times if you tell your creditors you are filing this will hold off a lawsuit or garnishment for a reasonable amount of time.
Don’t lie to your attorney
Disclose all assets and debts and be truthful with your attorney when they ask about your financial situation. If you think your attorney might want to know something, you should tell them. Your bankruptcy attorney can advise you on your options and the pros and cons of each option. If you withhold information or lie to your attorney, they cannot help you to the fullest of their abilities.
Don’t sell, transfer or give away property, without talking to your attorney
It’s very important that you can explain what happened to an asset, either land or personal property, when you file a bankruptcy. If you cannot adequately explain what happened to the asset, this could be a reason to deny your discharge. Be sure to discuss a potential transfer BEFORE you transfer the asset.
Don’t delay filing
When you initially meet with your attorney, the attorney is giving you advice on what you should do at that moment. If something changes, for instance, your job, your income, your marital status, your household size, if you move to another location or state, or even if you become entitled to an asset such as an inheritance or have a right to sue someone, this can all change your eligibility to file a bankruptcy.
Cynthia T. Lawson is the Managing Partner of the Bond & Botes Law Offices location in Knoxville, Tennessee. She holds a Bachelor of Science from East Tennessee State University, and a Juris Doctorate from University of Memphis, Cecil C. Humphreys School of Law. She currently serves as a Mentor for the Moment in bankruptcy.Read her full bio here.