Timing matters to the successful execution of a bankruptcy. The things you do directly prior to your bankruptcy can make a big difference to your outcome.
A good bankruptcy attorney will ask if you’ve engaged in any of these activities prior to filing. If you have, you might need to wait a few months to avoid any problems. If you want to file bankruptcy but see that you’ve already performed any of the actions on this list you should ask your attorney for guidance.
#1) Making big financial decisions.
Don’t cash out your retirement fund, not even to pay debt. Avoid selling your house, or buying one. You should even avoid luxury purchases, as purchases over
If you know you’re going to file for bankruptcy the only payments you should make are the ones that take care of your basic bills. This includes your rent or mortgage, your grocery bill, your utility bills, and your transportation bills.
If you take out more than $1000 in cash advances from a single creditor 70 days prior to your bankruptcy or use credit cards to purchase luxury items worth more than $725 90 days prior to bankruptcy then the court makes a presumption of fraud. That is, they assume you took out that money or ran up those debts with no intention of ever paying back the money. At best, those debts will not be dischargeable.
#2) Acquiring new debts.
Don’t open new accounts or run all your credit cards up to the limit. Doing so makes it look like you’re trying to commit bankruptcy fraud. Essentially it looks as though you are using the process to benefit from your credit lines knowing you’re going to try to wipe away those debts.
The type of debt doesn’t matter here. It even includes debts owed to family members, or friends.
#3) Transferring property.
Bankruptcy law already allows you to keep most of the property you’re worried about. You can either take advantage of exemptions or you can take advantage of Chapter 13 bankruptcy.
So there’s absolutely no need to panic, or to attempt to safeguard that property by putting it into your Mom’s name. This includes “selling” the property with the understanding that you’ll buy it back when all the nasty court proceedings are over with.
#4) Transferring balances.
Transferring balances may make it seem like you’re not doing anything other than moving a bunch of money around. Unfortunately, it can give the impression you’re favoring creditors by taking a whole bunch of debt from one and shifting it onto another.
This won’t stop your bankruptcy case, but it may prolong it. The trustee will try to decide whether to “claw back” those funds so they can distribute them according to your bankruptcy plan.
#5) Negotiating with creditors.
Don’t try to settle debts prior to bankruptcy, and don’t try to set up payment plans. Any attempt to do so will, again, give the court the impression you’re favoring some creditors at the expense of others.
Besides, by the time you know you’re going to file bankruptcy you’re really only throwing good money after bad by giving your creditors another cent.
#6) Marrying, divorcing, or separating.
Divorce and separation are complex legal matters which include the division of assets and debts. It’s hard to be embroiled in a bankruptcy and a divorce at the same time. It’s better to decide which case comes first before moving on to the next one.
There’s no legal reason why you can’t get married and file bankruptcy at the same time, but it may not do your marriage any favors.
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