If you find yourself in a difficult financial situation due to high medical bills, credit card debt, loss of income, or a recent divorce, your debts are more than likely piling up. If you have come to the conclusion that filing for bankruptcy is your best option to eliminate your debts, be careful. You want to make sure the process goes as smoothly as possible. One way to ensure that is by avoiding the following mistakes that are commonly made prior to or during the filing process.
Do Not Transfer Property
People often make the mistake of transferring their assets to their relatives. By assets we mean the property you own regarded as having value and available to meet debts. You may be under the impression that those will be safe from the bankruptcy proceedings. That is completely false and transferring could be construed as fraudulent by the court, even if you had no intention of concealing them.
Do Not Pay Specific Creditors
You would think paying your creditors would improve your chances of obtaining bankruptcy, but this could potentially harm your case. Any out of the ordinary payments to pay off a debt entirely can be considered preferential transfer. Basically, what this means is the creditor you paid off received payment over other creditors that hold the same weight. If this were to come up, it would delay your filing and the bankruptcy trustee could sue the creditor to get the money you’ve paid back so it can be distributed equally.
Do Not Use Credit Cards
This goes without saying, but let this serve as a reminder. If you are filing for bankruptcy one of the first things you should do is stop using credit cards immediately. No more luxuries; it’s time to buckle down. Which also means no more cash advances against your credit cards. Using a debit card directly connected to your bank account is strongly recommended for daily purchases.
Do Not Mishandle Extra Money
To be clear, the only money that should be deposited into your bank accounts should come from sources of income i.e. your job or work that you do outside of your job. You may have friends or family that are trying to help you overcome your financial burdens. While their generosity is appreciated, you want to avoid depositing it directly into your account as it can give the appearance of fraud.
Do Not Count On Future Payments
Keep in mind that any future payments you are expecting to receive and your current funds are part of your bankruptcy estate. Future payments include an inheritance you could be receiving or any lawsuit settlement you have been expecting. Once you file, any money you receive will be seized and used to repay your creditors.
If you are preparing to file for bankruptcy keep these tips in mind. We are aware this can be a difficult time for you and your family, which is why we offer our guidance based on your unique situation for the best possible outcome.
