Three Things You Should Avoid Doing Before Filing Bankruptcy
If you are in debt and considering filing for bankruptcy, there are some definite things that you should not do or you may be putting yourself in a difficult situation where you will have to wait for several months before you can file bankruptcy. Here are 3 things that you most definitely should not
Do Not Continue to Use Your Credit Cards 90 days Prior to Filing Your CaseFirst, do not continue to use your credit cards as charges on your credit card within the 90 days prior to filing your bankruptcy case may trigger a nondischargeability action against you by a creditor. This means that a creditor can sue you in the bankruptcy case to make sure those debts will not be discharged in your bankruptcy case. While charges for good or services that are reasonably necessary for support and maintenance of your household may not trigger this type of lawsuit, you can never be sure so it is best not to use the cards during this time period.
Do Not Pay Back Debts to Family Members.Second, do not pay back personal loans and/or any unsecured debts to family members in the year prior to filing your case. This is called a preference payment and if you do this you may have a trustee demanding the money back in order to distribute it evenly amongst your creditors. The law requires you to disclose any payments of more than $600 in the year prior to filing to these *insiders.* If you owe money to a family member just let them know that you cannot pay them back during this time.
Finally, do Not Transfer Assets Out Of Your Name.
On occasion I have had potential clients ask me whether it is okay to transfer assets out of their name prior to filing bankruptcy. I always tell people that if you do this then the bankruptcy trustee can go after the asset and reverse the transaction. Under federal law you must disclose transfers of assets within the 2 years prior to filing bankruptcy so do not transfer assets out of your name in order to keep from paying back your creditors. It is much better to find out whether there is an available exemption in law that will allow you to protect the asset.