Avoiding Common Mistakes Before Filing for Bankruptcy
Deciding to file for bankruptcy is not an easy process. You’ve probably struggled vainly, for months or even years, to pull your finances out of a nosedive and back on track. Once you make the difficult choice to file, it’s important to avoid common mistakes that could prove costly down the road.
At Bunch & Brock, Attorneys at Law, in Lexington, Kentucky, we truly care about our bankruptcy clients. For more than 30 years, lawyers at our firm have helped individuals, families, and businesses make the debt-relief choices that suit their needs. We want to help you make decisions that maintain your best interests and stabilize your financial future.
Don’t Let Your Pride Make You Wait Too Long to File
Sometimes, even when it seems nearly impossible to get out of debt, you soldier on, fueled by stubborn belief that you don’t have to declare bankruptcy to get back on your financial feet. You need to truthfully explore all of your options and not make the mistake of waiting too long to file, if that’s what you choose. The sooner you act, the better off you’re likely to be once the bankruptcy process is over.
Don’t File Under the Wrong Chapter
Individual debtors can file one of several types of bankruptcy: Chapter 7, Chapter 13 or Chapter 12 “family farmer” bankruptcy. Although these forms of bankruptcy will give you the opportunity to work your way out of debt, they are entirely different processes. For this reason, you should discuss the nature of your financial situation with an experienced bankruptcy lawyer at Bunch & Brock. We offer the safety net of looking before you leap.
Be Careful about Using Credit Cards before you File
Once you’ve decided to file for bankruptcy, it’s a great temptation to run up your credit cards to their limits in one last splurge before months of austerity. This is not wise. Certain charges and cash advances made within 90 days of filing may be ineligible for discharge.
Don’t Pay Off Personal Debts before Filing
If you owe a considerable amount of money to family or friends, repayment before filing also could be a mistake. Bankruptcy trustees can reclaim money paid to family or friends for personal loans if you pay them as long as a year before your bankruptcy filing.
Don’t Use Your 401k to Pay Down Debt
During the bankruptcy process, most retirement accounts are exempt from consideration as a source of payment. So deciding to withdraw money in your account to pay down debt prior to bankruptcy could expose it to seizure under some circumstances. The best way to protect retirement accounts is to leave them alone.
Don’t Transfer Property Immediately before Filing
Some gifts or other transfers of property can be reclaimed by a bankruptcy trustee. If you transferred property prior to filing, it may be subject to investigation for intent to hinder, delay or defraud a creditor.
Complete Mandatory Credit Counseling
Before filing for bankruptcy, you will have to complete a credit counseling course through an agency approved by the bankruptcy court. You must complete it within 180 days of filing your petition. Your certificate of completion must accompany your petition. And after you file, you must complete a debtor education course before the bankruptcy court discharges your petition.
Don’t Blow-Off Your 341 Hearing
Usually around a month after filing your petition, the court will require you to attend a hearing referred to as a “meeting of creditors” (your 341 hearing). It’s essentially a deposition where the bankruptcy trustee and any creditors who choose to attend can ask you questions – under oath – about your financial situation. You must attend. Your bankruptcy lawyer is likely to tell you how to prepare for your 341. Follow those instructions to the letter!
Obey All Court Orders
If you are involved in a collection lawsuit, you must comply with all state court orders. Collection cases may proceed against you until you have filed for bankruptcy protection. So don’t jump the gun and blow-off legitimate court-ordered collections before filing. Any state orders of collection are considered by the bankruptcy judge.
And Always Disclose the Whole Truth, No Matter How Much it Hurts
At Bunch & Brock, we offer solid legal advice and representation. No matter the state of your financial matters, telling the complete truth to your attorney will produce a better outcome for you. Contact us at 859-254-5522 or use the online form at the right of this web page to schedule an initial consultation and learn more about how to protect your financial rights.