How to Prepare for a Bankruptcy Filing: 6 Things Not to Do Before Filing for Bankruptcy
If you’ve made the decision to explore bankruptcy as a solution to crushing debt, congratulations: You’re already on the right track. When debts are out of hand, bankruptcy is usually the most effective way to rein them back in.
Contrary to the many myths and misinformation surrounding bankruptcy, filing for bankruptcy doesn’t wreck credit. In most cases, folks who file have little credit left to begin with. The right bankruptcy plan can allow these consumers to eliminate troublesome debts and begin rebuilding their financial lives.
That said, bankruptcy isn’t a walk in the park. What you do, or don’t do, prior to a bankruptcy filing can impact the success of your case. A good bankruptcy attorney will help you make preparations that maximize your chances of a positive outcome.
In summary, here’s what to avoid if you’re considering bankruptcy.
1. Taking Out Money to Pay Off Credit Cards
When you have more credit card debt than you can afford, you might be tempted to raid your retirement fund or take out a home equity loan to stay on top of bills and whittle away debt. But if you end up discharging those debts with bankruptcy, what’s the benefit of paying them off now? You’ll only end up stuck with depleted savings and a secured loan that could cost you your house.
2. Ignoring Your Creditors
Of course, we aren’t suggesting that you ignore your debts, either. If you’re thinking of bankruptcy, creditors can’t read your mind – and if you’ve defaulted on debts, they could already be in the process of garnishing your wages, repossessing your vehicle or foreclosing on your home. Make sure to notify your creditors of your intent to file for bankruptcy as soon as possible. With the help of a bankruptcy lawyer, it’s possible to stop legal actions such as foreclosure right away.
3. Failing to File Taxes
When you’re already up to your eyeballs in debt, the last thing you want to deal with is paying your taxes. But ignoring Uncle Sam isn’t an option, especially if you’re hoping to eliminate debts with Chapter 13 bankruptcy. Your tax returns are required to determine your past and present earnings and assets. If you’re missing tax returns during the last two years, your bankruptcy case could be dismissed and your hopes of financial freedom put on hold until you get those returns filed.
4. Racking Up New Charges
Some folks get the not-so-bright idea to ring up new debt just before they file for bankruptcy. After all, it’s just going to get discharged, right? Not if creditors can prove its bankruptcy fraud! Charges in the months leading up to bankruptcy deemed to be in excess of your usual spending could be considered fraud if it’s determined that you never intended to pay them off. If you take out cash advances or buy luxury items, you may be denied a discharge on those debts. Similarly, this isn’t the time to take out loans against your retirement or home.
5. Transferring Titles
Maybe you’re worried that you’ll lose your car when you file for bankruptcy, so you decide to transfer the title to your sister – or, even worse, to hide the evidence of your asset altogether. Unfortunately, this usually backfires. It’s okay if you chose to sell an asset at fair price before bankruptcy simply because you needed the money.
However, transferring, hiding or quickly selling assets for less than they’re worth can not only prevent the discharge of your debts, but may also lead to criminal charges for bankruptcy fraud.
6. Waiting Too Long
Albert Einstein once defined insanity as doing the same thing over and over and expecting a different result. If you’ve been drowning in debt and unable to pay your bills, but refuse to file for bankruptcy just in case things get better, you’re just fooling yourself. When left to it’s own devices, a debt doesn’t shrink; it grows. Creditors, banks and payday loan providers all rely on outrageous rates and fees to keep you in ever-ballooning debt. Bankruptcy provides the power to break free. Why wait until you start missing tax payments or having your wages garnished before you take action? The sooner you file for bankruptcy, the sooner you can get back on your financial feet.
Contact DebtStoppers today for a free personal debt evaluation with one of our expert bankruptcy attorneys. We can guide you through the bankruptcy process, helping you overcome debt and obtain a fresh financial start.