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The 5 biggest mistakes people make before filing bankruptcy

If you are considering filing bankruptcy, I suggest you read carefully.

#1  DON’T give up your retirement account unnecessarily
Some people considering bankruptcy liquidate retirement accounts with the most honorable of motives—in a futile attempt to catch up on those mounting debts. Others are attempting to reduce assets before filing. However, most retirement funds in qualified ERISA accounts are protected, and you may be able to discharge your debts and keep your retirement account.

 

#2 DON’T ignore lawsuits against you
It may seem reasonable to assume that if you’re going to file bankruptcy anyway, there’s no need to appear in court or to respond to pending lawsuits. A judgment can be discharged in bankruptcy, right? That’s true, but until your bankruptcy case is filed, any pending legal action will continue to move forward. It’s important that you protect your rights–and protect your property from liens–until a stay from the bankruptcy court takes over. Don’t let an unsecured debt turn into a secured debt by failing to respond.

 

#3 DON’T transfer property out of your name
In order to protect property like homes, cars and cash, some may want to transfer property to a friend or family member before filing for bankruptcy. That’s far from a simple proposition: the bankruptcy trustee may be able to reverse a transfer of property if it was made in an attempt to hide assets from your creditors, and such transfer can open up the whole case to closer scrutiny and challenges by creditors. And, in many cases it’s all for nothing, since exemptions may protect property like your home, your automobile, and your wedding rings.

 

#4  DON’T pay back your friends and family while ignoring other creditors
Naturally, when people have limited resources, they want to make sure those closest to them are taken care of, and honor the commitments they see as more personal. In bankruptcy, however, all creditors are entitled to a proportionate share of any funds available to pay your debts. Preferring one creditor over another is not permitted. If you’ve made payments to a family member within a year before filing bankruptcy, the bankruptcy trustee may be able to take action to recover that money from your family member and distribute it proportionately among all of your creditors.

 

 

 

 #5 DON’T withhold information from your lawyer
Bankruptcy clients sometimes think they have good reasons for hiding information from their attorneys or putting just a little spin on their information. Some simply don’t want the attorney to think badly of them, while others are attempting to protect certain property by not disclosing it. However, your attorney cannot effectively protect you without complete information. You could lose assets, have your bankruptcy case dismissed, or even face criminal charges. And, your attorney may withdraw from your case if you’re dishonest with him.

 

AND the biggest mistake of all, DON’T try to handle your own bankruptcy if you’re not well-versed in bankruptcy law and procedure .

In summary

  • Don’t liquidate or transfer assets before filing
  • Don’t ignore lawsuits against you
  • Don’t pay debt owed to family and friends prior to filing

Don’t go at it alone. Do hire an experienced bankruptcy attorney to represent you

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