Four Mistakes That Can Derail Your Bankruptcy
If you are in dire financial straits and are considering filing for bankruptcy, certain actions can hurt your bankruptcy case, even if done innocently. Even if you are planning on filing bankruptcy several months in the future, it is important to speak with a lawyer and avoid doing something that could derail your debt relief plans.
At Roderick Linton Belfance, LLP, our attorneys have extensive experience handling bankruptcy law matters for people in Akron, Medina and throughout Northeastern Ohio. We can help you make sure you avoid the following bankruptcy mistakes:
Transferring Money Or Property
Many people fear losing money or property during the bankruptcy process. They think they can avoid this by transferring assets to the account of a friend or family member, or by putting property in another’s name. However, bankruptcy trustees routinely deal with these issues, so attempts to “hide” assets from the bankruptcy court are rarely successful. If you are caught doing this, you may be denied a discharge of your debts altogether and face criminal penalties.
Paying Back Select Debts
If you are in debt, you likely want to do “the right thing” and pay back as many debts as you can before filing bankruptcy. This is especially the case if you owe money to a friend, family member or a certain favored creditor (e.g., paying back your car loan to avoid repossession of your car).
Although your intentions may be good, paying back certain creditors, but not others, can backfire if these repayments occur within 90 days to a year before you file bankruptcy. Once you file, the trustee will examine any payments you made before you filed bankruptcy. If you selectively paid creditors before bankruptcy, he or she may sue the creditors that you paid to have the money returned. Once the trustee has collected the money, he or she will use it to pay off all your creditors equally under the law.
Since facing a lawsuit would likely cause your friends and family unnecessary anxiety and expense, it is better to wait until after you have completed your bankruptcy before paying back any personal debts.
Racking Up New Credit Card Debts
In most cases, credit card debt is eliminated during bankruptcy. Because of this, some persons believe that they can rack up heavy debts before bankruptcy and have them eliminated later. However, if you run up heavy debts just before filing bankruptcy, your creditors may object to the discharge of the debts, arguing that you had no intention of repaying them.
Likewise, if you use a credit card to purchase a luxury item (vacations, jewelry, etc.) of over $600 within 90 days of filing bankruptcy, the court may deny you the discharge of the debt.
Raiding Retirement Accounts
Over your working life, you may have accumulated significant assets in a retirement account such as a 401(k), IRA, pension or another deferred compensation plan. When faced with collection calls, many people view these accounts as a tempting source of funds to pay off their liabilities.
However, these accounts are generally exempt by law from creditors’ claims during bankruptcy. As a result, you can realize bankruptcy’s benefits without worrying about losing your retirement assets during the process.
We Can Help Make Your Bankruptcy Go Smoothly
There are many pitfalls that can potentially cause problems to your bankruptcy case. To minimize the risk of this happening, contact our law offices online or by telephone at 234-281-4949 to arrange a legal consultation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.