Costly Mistakes to Avoid Prior to Filing for Bankruptcy
When you’re in severe financial distress and considering bankruptcy, don’t let desperation overrule good judgment. Certain actions or omissions taken in the months leading up to filing for bankruptcy can hurt your chances for a successful outcome. Approaching things with a level head will help prevent costly mistakes that can come back to haunt you.
Here are several common mistakes to avoid before filing for Chapter 7 or Chapter 13 bankruptcy:
- Failure to disclose assets — All the information you file in your bankruptcy petition will be checked by the trustee, so be careful not to leave out information. A willful omission could lead to dismissal of the case and you could be barred from filing again. Always tell the truth to your lawyer, your creditors and the court.
- Draining your retirement accounts — Do not take money from your retirement accounts in an effort to protect them. Accounts like 401(k)s, IRAs and pensions cannot be seized in bankruptcy, so there is no need to shelter them.
- Transferring assets — The trustee will review asset transfers within the two years prior to your bankruptcy filing. If you sold property such as cars, cash, jewelry or real estate for less than fair market value, especially within 90 days before filing, this could be considered a fraudulent transfer and the trustee could void it.
- Taking on new debt — Do not take out loans or lines of credit in the run up to bankruptcy, especially within 90 days of filing. If you do, the trustee could conclude that you obtained the credit with no intention of paying it back because you knew it would be erased in bankruptcy.
- Trying to go it alone — Although courts allow people to file their own bankruptcy cases, it is highly advisable that you work with a qualified bankruptcy lawyer. An experienced lawyer will know how to protect your assets, how to follow court procedures and how to keep you from running afoul of the rules. In the end, paying a lawyer will probably cost you less than trying to do it yourself because of all the mistakes that will be avoided.
If you’re in severe financial straits, talk to a lawyer about bankruptcy and other debt-relief tools. Don’t risk trying to climb out of the hole yourself. The Law Offices of Michael Jay Berger in Beverly Hills helps people like you every day. Reach out to me at 310-271-6223 or contact me online to schedule a free initial consultation.