Bankruptcy is a valid way to get a fresh financial start. However, to reap the benefits of bankruptcy, it’s important to do things the correct way. There are many actions that, if taken prior to or during bankruptcy, can create big problems down the road. In this article, we discuss five actions to avoid when filing for bankruptcy.
#1: Emptying Your Retirement Account
Most retirement account funds are shielded from bankruptcy. Therefore, it is usually a huge mistake to withdraw retirement funds prior to bankruptcy to pay off a debt that bankruptcy could eliminate. And although there may be some exceptions to this rule, it’s advisable to consult with an attorney before touching any of your retirement funds when you plan on filing for bankruptcy.
#2: Providing Inaccurate Information
Your bankruptcy paperwork must contain complete and accurate information about your debt, assets, income, expenses, and financial history. If you knowingly misrepresent such information, you could be subject to criminal penalties. In addition, if you fail to file the proper documentation, the bankruptcy court may dismiss your case, or you may have to file additional papers and pay extra fees to correct the paperwork.
#3: Racking Up New Debt
Some people make the mistake of purposely accumulating new debt prior to filing for bankruptcy. After all, the debt will just be forgiven anyway, right? Wrong. If you rack up debt in the 70 to 90 days before filing bankruptcy, the creditor may object to your discharge by arguing that you took out the loan with no intention of paying it back. In other words, you may find yourself on the hook for the debt—even after bankruptcy proceedings conclude.
#4: Moving Assets
Selling, transferring, or hiding assets before filing for bankruptcy is generally a bad idea. If you do so with the intention of defrauding the court and your creditors, you may be denied a discharge and even subject to criminal penalties. However, there are some exceptions to this rule, so if you have already sold some items to pay your expenses leading up to bankruptcy, you should disclose this to your bankruptcy attorney.
#5: Selectively Repaying Loans
Finally, if you pay back loans to relatives or friends within one year of filing for bankruptcy, or you pay back other creditors within 90 days of filing, this may be considered a preferential transfer. When the bankruptcy court learns of a preferential transfer, it may file an adversarial proceeding to retrieve the money from the person or entity you paid.
Contact a Chapter 7 Bankruptcy Attorney
If you would like to explore your Chapter 7 bankruptcy options in Texas, you need an experienced Chapter 7 bankruptcy attorney on your side. At Toronjo & Prosser Law, our bankruptcy attorneys are here to provide you with the personal attention you deserve. Unlike many larger firms, when you come to us for help with your bankruptcy case, you will work with an experienced attorney from day one. With thousands of bankruptcy cases under our belts, our Chapter 7 lawyers are well qualified to handle your case in an effective manner. Please contact us today to schedule a consultation with one of our talented lawyers.