The Biggest Bankruptcy Mistakes
Before Filing
Listen to Atty. Kathleen Kane on 95.9 WATD
Mistake #1: My credit card debt will be discharged anyway, so I can use my card to pay for other debts.
It is true that credit cards are considered unsecured debt, most of which can be discharged under Chapter 7. However, debts within 90 days of the filing may be non-dischargeable. Do not run up your credit cards or take out cash advances if you can avoid it.
Mistake #2: I’ll use the consolidation company I found to avoid bankruptcy altogether.
Be very wary of consolidation companies, especially if you find them online. Although they claim to keep you out of the red, they are not free services and you could be facing a drop in your credit, income tax liability, or both.
Mistake #3: The money in my 401k is just back-up anyway, and I really need some extra money right now.
Retirement accounts were named for a reason – they are meant for your retirement. Most likely, your 401k will be exempt and you will be able to keep it.
Mistake #4: I feel awful about borrowing money from my parents. I have to pay them back before I file.
Although your intentions are good, trustees will not allow you to show “preference” to your family members over creditors. They often take back loans to family members made before you file to ensure fair distribution.
Mistake #5: That joint account with my mother will be fine. It was never really “mine” in the first place.
The Bankruptcy court may consider any asset with your name on it to be part of your estate, for example, real estate, cars, or bank accounts. If you try to protect something by transferring ownership, whether it was really “yours” to begin with or not, the trustee could reverse the transfer of property and take it back. Often the very assets you are trying to protect will be considered exempt.
Mistake #6: I’m expecting to inherit a large amount of money soon, but my lawyer won’t understand the situation. I will just leave that out when I talk to him.
It is never a good idea to hide or withhold information from your lawyer or anyone involved in bankruptcy proceedings. Your case could be dismissed, you could lose assets, or even face criminal charges if you keep things a secret. Mistakes can be corrected, but assets cannot be protected if your attorney does not know they exist.
Mistake #7: I’ll deal with this lawsuit when I file for bankruptcy and take care of everything at once.
Pending lawsuits or judgments can have immediate consequences before you even begin to think about filing for bankruptcy. Your priority should be on these and similar issues before worrying about car loans and credit cards.
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Do you have questions about this information?
Call Attorney Kathleen Kane at 888-7 NEW START (888-763-9782).
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