5 Things Not to Do if Contemplating Bankruptcy

If you are struggling with debt and are contemplating bankruptcy, there are a few things you should try to avoid doing before you file as they may jeopardize your ability to have your debts discharged.

  1. Do Not Create New Debt

It is very important that you do not make any large purchases on credit or take out any loans within 90 days before filing bankruptcy. The creditor that you made the purchase or loan with may dispute the bankruptcy on grounds of fraud. If this happens, the bankruptcy court may deem that those recent transactions cannot be included in your bankruptcy or that you cannot file bankruptcy at all.

  1. Do Not Sale or Transfer Property

When you file for bankruptcy you have to declare any property that you may have sold or transferred within the year prior to filing. The bankruptcy court requires this information in order to determine that you have not tried to hide assets that could be used to pay creditors. If you have conducted such transactions, the bankruptcy court will scrutinize your reasons for transferring or require an accounting of what you did with the funds from the sale.

  1. Do Not Repay a Loan to Family or Friends

In the bankruptcy process, you will be asked if you have repaid any money to relatives or friends within the last year. The bankruptcy court could consider such an action as a “preferential transfer” and actually take legal action to get the money back in order to judiciously distributed among all your creditors. This could be a hardship for your loved ones.

  1. Do Not Be Delinquent in Filing Taxes

The bankruptcy court requires at least the last 2 years of your tax returns. They use the returns as verification of your financial status. If you do not have the tax returns, there is no way your case can go forward until you have filed the delinquent tax returns.

  1. Do Not Get Rid of Billing Statements

Billing statements are important to the bankruptcy court. Statements from your creditors show exactly how much is owed and statements from regular recurring bills such as utilities and insurance so how much of your income goes toward your cost of living. Both of these types of statements are important in determining the outcome of your bankruptcy.

If you are contemplating filing bankruptcy, it is important to seek the advice of and experienced attorney to make sure that you are on the right course. Click here to reach out to us today for a free consultation to see if we can help.