Payments to Relatives
One of the most common mistakes debtors make prior to filing bankruptcy is paying off a debt to a relative. Chris (debtor) receives a bigger than expected tax refund and decides to pay back his mother the $2,000.00 she lent him. Bad move. Here is why: In Missouri, any payments made to relatives within one year of filing bankruptcy are considered "insider" preference payments. The bankruptcy trustee has the right to take back from mom the money you already paid her and divide it evenly between everyone you owe. This could be both embarassing and stressful.
Protecting Your Bank Accounts
If you have a credit card with the same bank where you hold a checking or savings account, you may want to switch banks if you anticipate not being able to make your payments for the foreseeable future. Many banks have terms written into their contracts which allow them to seize money from your checking or savings account if you are behind on your credit card payments. If you lose your job and are forced to default on a credit card, switch your checking and savings accounts over to a bank where you do not owe money.
Have a Reliable Car
Your credit will take a hit after bankruptcy and it could be several years before you can get a loan at a reasonable interest rate. If at all possible, make sure you have a reliable car going into bankruptcy. You will want your car to be exempt (be something you can keep in-spite of the bankruptcy) and I recommend consulting with an experienced attorney well before you need to file in order to get the most out of your bankruptcy.
Don't Wait Until Your Wages Have Already Been Garnished
If you are contemplating bankruptcy, don't wait until after your wages have been garnished to speak with an attorney. Judgments can be stopped prior to garnishment, and there is no need to lose money to your creditors by putting together your bankruptcy after you are already losing one quarter of your paycheck every month.
Don't Pick the Cheapest Attorney in Town
Don't pick the cheapest attorney in town. You don't need to pick the most expensive either. There is probably a reason that an unusually cheap attorney is so cheap. Sure, you are filing bankruptcy and you have no money, but dismissing your debts is serious business. In law as well as in life, you usually get what you pay for. If mistakes are made in filing your bankruptcy, you could end up owing debts that you thought you had dismissed in the bankruptcy. It is much cheaper and much easier to do things right the first time. Many experienced attorneys offer payment plans and some will offer you reduced rates if you truly have no means to pay. Get help, and get help early, but get expert help!