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Things You Should NOT Do Before Filing for Bankruptcy

by | Sep 16, 2021 | Consumer Bankruptcy, Industry News, Updike, Tracy L.

If you are having trouble paying your bills, your instinct may be to consider bankruptcy. Before you jump the gun, you should plan your strategy. This includes finding the right bankruptcy attorney to help you determine which type of bankruptcy best suits your scenario, what time frame you should be operating on, and making sure you do not inadvertently commit bankruptcy mistakes that could jeopardize your case.

If you haven’t committed any of these bankruptcy “don’ts”, you may be ready to discuss getting a fresh financial start with a bankruptcy lawyer.

Don’t Pick the Wrong Time to File

You can pick the wrong time to file. First, technically, you can only file Chapter 7 every eight years or six years after you filed Chapter 13. You can file Chapter 13 every two years or four years after a Chapter 7.  But this doesn’t mean you should to wait too long if you are in trouble. If a creditor is filing a lawsuit against you, you may want to file as soon as possible. The bankruptcy starts an automatic stay, which means that creditors cannot continue collections, nor can they file a new lawsuit. If a lawsuit to recover money is in progress, forward progress on the case must stop. It can be harder to get rid of a judgment, particularly if you own real estate, so you may want to stop collection lawsuits before the case finishes and you receive a judgment.

Second, there may be a specifically advantageous time to file bankruptcy if you owe older taxes, have a unfavorable car loan, or have had a period of time with a loss of income.  These planning issues are all things that a bankruptcy attorney can advise you on after a full consultation.

Do Not Choose File Under the Wrong Chapter

You can file Chapter 7, which is called a liquidation, or Chapter 13, which is a reorganization. However, there are at least three different calculations you want to have done before choosing.  You must pass a “means test” to determine what your gross income over the last 6 months will allow you to qualify for.  There is also a budgeting calculation that determines what is appropriate for you.  And lastly, there is an asset and exemption calculation.  Failure to file the proper chapter after doing these calculations can lead to a sale of your property by a trustee or a motion to dismiss for abuse.  A bankruptcy attorney can help you determine which bankruptcy is best for your situation.

Do Not Provide Incorrect Information

When a bankruptcy lawyer prepares your bankruptcy filing, make sure you check it over before they file on your behalf. If you provide incorrect information, whether by accident or omission, and the court finds out, your case can be dismissed. The trustee, the court, or creditors could accuse you of fraud, which carries a steep penalty in a federal court of up to $250,000 in fines, 20 years in prison, or both.

Do Not Create New Debt or Move Assets

If you know you are going to file for bankruptcy, do not create new debt within 90 days of filing or move assets through transfer or sale.  If you create new debt, creditors might object to your bankruptcy discharge and ask the court to charge you with “presumptive fraud” for these transactions, and you might have to pay them all back.  A transfer of assets can be undone for a period of 1 year, 2 years and even up to 4 years depending on very specific factual circumstances.  You and/or your transferees (particularly if they are family members) can lose the property altogether to the Trustee in bankruptcy, and it could also lead to a denial of discharge and the implementation of criminal penalties.

Contact a Bankruptcy Attorney

Although you can file for bankruptcy on your own, it is a complex process. Not consulting an attorney to help you determine the right approach for your situation and time to take advantage of your circumstances could get you into trouble. Instead of saving money, you could end up costing yourself much more. An experienced bankruptcy lawyer will help you understand your rights, know what to expect and ensure that you have a knowledgeable advocate by your side throughout the process.

If you are ready to regain control of debt and discuss your options, contact bankruptcy lawyer Tracy Updike at Mette, Evans, & Woodside for a judgment-free consultation.

Schedule a Free Consultation Today