5 Things You Should Avoid Doing Before Filing for Bankruptcy

 Posted on September 30, 2022 in Pre-bankruptcy Planning

If you are experiencing financial problems, or if you are struggling to repay large debts, you may be considering filing for bankruptcy. This is a solution that is available to most people in the United States, and it will allow you to receive relief from your debts. This can often be the best way to end harassment by creditors and ensure that you will be able to put the money you earn toward meeting your family's ongoing needs and saving for the future. However, when preparing to file for bankruptcy, there are a few things you should avoid doing. Failure to follow the laws that affect the bankruptcy process could result in your case being dismissed, and you may be unable to discharge your debts and receive the financial relief you need.

1. Do Not Put Off Bankruptcy Longer Than Necessary

If you are struggling to make ends meet, you should not ignore the warning signs that you may need to file for bankruptcy. The sooner you seek help, the better off you will be. Putting off the inevitable will only make your situation worse, and it will put even more stress on you and your family. Delaying bankruptcy could lead to creditors obtaining a legal judgment against you, the garnishment of your wages, the repossession of one or more vehicles, or a home foreclosure. These issues can complicate the bankruptcy process and make it more difficult to address the debts you owe. If bankruptcy is the best option for dealing with your debt, you should be ready to take that step before your problems get worse.

2. Do Not Transfer Assets to Family or Friends

You may be concerned that your assets will be seized during the bankruptcy process. However, if you attempt to protect certain assets by transferring them to family or friends, the court may consider this to be fraud, and you could face serious penalties. It is better to be honest from the start and disclose all of your assets to your attorney. Fortunately, exemptions will apply in a Chapter 7 bankruptcy, and you will likely be able to keep most of your assets.

3. Do Not Quit Your Job

Your ability to address debts through bankruptcy will depend on the income you own and the financial resources available to you. However, purposely reducing your income is not a good way to show that you need relief from your debts, and it may even be considered fraudulent behavior. It is important to maintain steady employment so you can afford to pay your ongoing living expenses during and after your bankruptcy case.

4. Do Not Max Out Your Credit Cards

Just because you are considering bankruptcy, this does not mean you should start racking up debt with the intent of receiving a discharge. Excessive credit card charges or large purchases made within six months of filing for bankruptcy may be considered fraud. Instead, you will want to focus on paying your ongoing expenses and using your money responsibly.

5. Do Not Try to Hide Your Assets

Just as transferring assets to others is illegal, hiding assets and failing to report them during the bankruptcy process is a form of fraud that can result in serious penalties if discovered by the court. Be upfront about all of your assets, including bank accounts, real estate property, investments, vehicles, and valuables. Your attorney can help you determine which assets are exempt from seizure by creditors.

Contact Our New Braunfels Bankruptcy Lawyer

Filing for bankruptcy is a big decision with long-lasting consequences, but it may be the best option if you are struggling to repay your debts. Before you take that step, you should make sure you have taken the correct steps to prepare for bankruptcy and avoid any actions that could be considered to be fraud. By following these guidelines, you can ensure that you are prepared to complete the bankruptcy process successfully. At the Law Offices of Chance M. McGhee, our Schertz, TX bankruptcy attorney can advise you on the best steps to take to receive relief from your debts. Call 210-342-3400 today to set up a free consultation.

Sources:

https://www.kiplinger.com/slideshow/credit/t025-s001-things-to-know-before-filing-for-bankruptcy/index.html

https://www.cnbc.com/2022/08/14/what-experts-say-to-do-before-during-and-after-filing-for-bankruptcy.html