Mistakes people make


Even with the best of intentions, some things people do BEFORE filing a bankruptcy case can be serious mistakes and cause serious problems with the bankruptcy case.  For example: 

1.  Excessive use of credit cards:

Once you have made your decision to file a bankruptcy petition, stop using your credit cards, but continue to make the minimum monthly payment, if possible.   Charges for luxury goods and services owed to a single creditor, totaling to more than $500.00 within 90 days of filing, are presumed nondischargeable and an abuse of the bankruptcy process.   Cash advances totaling to more than $750.00 for all creditors within 90 days of filing are also presumed to be nondischargeable and thus may be found to be due and owing.  Don't jeopardize your "fresh start" by running up your credit cards.

2.  Paying back family members:

Your family members may be creditors if they loaned you money.  Unfortunately, you cannot treat your family members any better than you would an ordinary creditor with regard to repaying debts.  In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy, although amounts under $2,000 are generally too small to bother with.  Non-family creditors are subject to a "look-back" of only 90 days.

3.  Closing out retirement accounts:

Retirement accounts are generally fully protected from creditors.  You can eliminate your debt and usually keep whatever you have in a retirement account, free and clear.  Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.  Don't jeopardize your future retirement!

4.  Transferring or conveying property (selling or giving it away, especially to a relative):

A bankruptcy trustee can undo a transfer of property that previously belonged to you.  This can occur if the transfer was made within four years of the filing of the bankruptcy (and sometimes longer) with the intent to hinder, delay or defraud a creditor, or simply if a fair price was not received.

5.  Taking out a second mortgage:

Don't take a loan against your real estate in an effort to reduce the equity.  You can often file bankruptcy and not lose this valuable asset.  If you take out a second mortgage to pay credit card debt, you may be putting your house at risk, and you will be incurring more debt that you can't afford. 

6.  Failing to appear in court:

Do not assume that you can avoid a lawsuit simply because you've decided to file bankruptcy.  A collection case continues until your bankruptcy case is actually filed, which occurs only after all the fees are paid; you have met with us and provided all the necessary information for preparing the 40 or so pages of bankruptcy forms; you have reviewed, signed, and returned the forms to us for filing with the Bankruptcy Court; and you have completed the required debt counseling program (by telephone or Internet) which we coordinate for you.  Once the case is filed, we will let the court and the collection agency know that they are prohibited from continuing.

7.  Not telling us the truth, the whole truth and nothing but the truth:

We can't help you if we don't know what the real problem is.  Failing to tell us about your assets and debts can lead to the loss of those assets, denial of your bankruptcy discharge, fines, imprisonment, or any combination of the above.  I know that sounds harsh, but reality is like that sometimes!  Full disclosure and complete honesty is mandatory!

The Law Office of David G. Baker is a debt relief agency as defined by the amendments to the Bankruptcy Code that became effective on 17 October 2005. 

PLEASE NOTE:  Nothing on this page or this website is intended to constitute legal advice.  Your circumstances may be different, so call me or another lawyer to discuss your particular situation BEFORE taking any action!

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