Make the bankruptcy process easier for yourself by avoiding these common mistakes. Although we can work around most of these mistakes, why dig a deeper hole before you file?
Anything You Do Shortly Before Filing Bankruptcy Is Looked At Very Carefully
If you think that there’s even a 1% chance of your filing bankruptcy, leave everything the way it is right now, and come in for a free initial consultation. Too often, I see good-minded people making their situation worse by some of the things that that do just before coming to see me for a free initial consultation.
Getting A Home Equity Loan To Pay Bills Instead Of Filing Bankruptcy
Your house is not an ATM machine, and you can’t borrow your way out of debt! Sure, you might have a lower payment, but you can lose your home if your income changes and you can’t pay back the loan. On the other hand, if you can’t pay your credit cards, they can harass or sue you but they can’t take your home. Once you file bankruptcy, the harassment must stop and a Chapter 7 discharge, if you are eligible, will eliminate all of the credit card debt.
Cashing In Your IRA Or 401(k) Instead Of Filing Bankruptcy
Your retirement account is exempt property, which means creditors cannot touch it. So, why give it to your creditors? You'll need this money for your retirement.
As a Fort Worth bankruptcy lawyer, I've seen people clear out their retirement accounts to pay some of their bills, then ultimately have to file bankruptcy to handle the remainder of their bills. Come to see me before you take money from your retirement accounts.
Waiting Too Long
It’s human nature to put off unpleasant events, but the best time to handle debt problems is when things are not going your way financially. If you wait until you have more income, it may cost you more to get out of debt. Take advantage of bad financial times by getting a fresh start.
Case in point: A lady came in for a debt consultation following her divorce. She qualified for a Chapter 7 bankruptcy, in which there are no payments to a trustee, but she chose to do nothing. Much later, she came in for another debt consultation because her situation had changed: she had gotten married. She qualified for bankruptcy, but this time she was not eligible for a Chapter 7; she had to file a Chapter 13 that required a plan payment of several hundred dollars a month for five years. Even though her new husband didn’t file bankruptcy, we had to consider all household income. By delaying the inevitable, she brought her old debt problems into her new relationship.
The advice here is to resolve your debt problems with bankruptcy while you’re "down.” If you wait until you “get back on top of your game”, then it may cost you more or even be unavailable.
Here’s a common situation: People sometimes come in for a debt consultation after they have ignored a credit card lawsuit, which resulted in a judgment being entered against them. They come in looking for answers because the cash in their bank account has been garnished by the creditor that obtained the judgment. In most cases, had the person come in when they were first sued, we could have stopped the lawsuit and protected the cash.
The advice here is to consult a qualified Fort Worth bankruptcy attorney as soon as you are sued. Doing nothing can make the problem bigger.
Failing To List Everyone You Owe
You must list everyone you owe. If you don’t list a creditor, then you will still owe the creditor after the bankruptcy is completed.
Failing To List Everything You Own
Tell your lawyer about everything you own, even if you think it is “exempt” or if you want to “keep it".
List It, Or Lose It! If you fail to list property in the bankruptcy, then it may not yours after the bankruptcy case is completed. Property of the estate in a bankruptcy case includes "all legal or equitable interests of the debtor in property as of the commencement of the case."
Let’s say you have a car accident claim, but you don’t list it. After the bankruptcy case is over, you lose any right to assert that claim in separate litigation. This is known as the doctrine of judicial estoppel.
Keeping More Debt Than You Can Afford
Although you must list everyone you owe, you get to choose which debts you want to keep.
Here’s the key point: If you want to keep possessions that are secured by the property, you’ve got to keep paying for them! The flip side of that coin is this: the more you keep, the more you must pay. So, don’t bite off more than you can chew.
Having Too Much Cash
You are limited as to how much cash you can protect in a bankruptcy case. Determining just how much you can protect requires a review of several factors. If you have too much cash, then I will suggest some bankruptcy estate planning strategies. The key point here: don’t give it to family before you come to see me. We must talk before you move anything around!
Filing Bankruptcy When You Have A Substantial Tax Refund Pending
Tax refunds are treated like cash in the bank. If you have too much, we may need to do some bankruptcy estate planning to protect it.
Large Credit Card Usage Shortly Before Filing Bankruptcy
Significant cash advances, balance transfers, or purchases on a credit card shortly before filing bankruptcy can create problems for your case. How much is too much? How soon is too soon? It depends on several factors. Stop using the cards, and let’s talk.
Repaying Family Members Less Than A Year Before Filing
The most common problem is that the client repays a family member with their tax refund, then the client comes to see me about bankruptcy. That payment to the family member could be a problem in your case; it could be seen as a "preferential transfer", which is not permitted. If you can, wait until after your case is completed to repay family members.
Transferring Or Giving Property To Family
You may be able to protect your property while it’s in your possession or control, but not after you have given it to someone. This may be considered a "fraudulent transfer", depending on when the transfer is made. So, keep it and you may be able to protect it.
If you have questions about bankruptcy, I recommend using a qualified Fort Worth bankruptcy attorney. As an experienced and dedicated Fort Worth bankruptcy attorney, I can offer advice on how to proceed based on your particular situation. You and I can meet face to face to discuss your options. I look forward to helping you become debt free. To schedule a FREE consultation, please contact me at (817) 732-7590 or (972) 819-3861. You can also send me an E-mail or complete the Free Case Evaluation.