Are you having financial problems? If you are considering bankruptcy as an option, make sure you are aware of what NOT to do when filing bankruptcy. Certain actions (or inaction) could limit your options, or put you at risk of having your bankruptcy case dismissed, so consider this list of what not to do when filing bankruptcy.
4 Things You Absolutely Should NOT Do When Filing Bankruptcy:
- Do NOT transfer property or money. Transferring title to a property before you declare bankruptcy is not an option. Do not sell or transfer any property or assets to relatives or friends in an attempt to hide them from the bankruptcy court or “keep them out” of the bankruptcy. At the Meeting of the Creditors, the bankruptcy trustee will immediately ask about any transfers, and the trustee has the power to recover any assets that you transfer within a certain amount of time prior to filing. In addition, any creditor and the trustee may object to your discharge if the transfer was made with bad intentions and within 2 years of the date you file.
- Do NOT leave out any income when filling out your bankruptcy paperwork or speaking with your bankruptcy attorney. Some people assume that a second job or a part-time job doesn’t count as real income, but all income to the household must be included. The bankruptcy court handles bankruptcies all day long every day, and they know how to put together a story from the bankruptcy paperwork. The trustee will look back at least six months to determine a “normal” state for the household income. You must also list your spouse’s income unless you are legally separated. While the bankruptcy court cannot require that a spouse pay a debtor’s debts, they can require that a spouse contribute to a household. Anyone you claim as a dependent must also have their income listed, and while social security doesn’t count towards the income taken into consideration when qualifying for bankruptcy, it still needs to be included on your income schedules.
- Do NOT pay back your favorite creditors or any family/friends that may also qualify as a creditor. It’s not out of the norm for someone filing bankruptcy to have one or two “creditors” that they want to pay in full before they file bankruptcy, but the bankruptcy court doesn’t recognize “favorites.” The court is in charge of who gets paid and how much and rather than your “favorites” the bankruptcy court puts your secured creditors at the top of the list. (Secured creditors are paid first from any available funds in a bankruptcy, with any remaining funds divided equally amongst creditors). If you take it upon yourself to play favorites and pay certain debts before filing bankruptcy, the trustee may take back funds paid to family or friends within the year prior to filing.
- Do NOT create new debt without first discussing the matter with your attorney. In some instances, it may be a good idea to get a secured car loan prior to filing bankruptcy, but it is a bad idea to purchase any nonessential items on credit prior to filing. If you aren’t sure if an item is essential or not, ask your attorney. Not only will the trustee be the one to determine whether an item qualifies as essential or not, but creditors can object to major purchases made in the months before filing, and may even be able to file their own lawsuit asking the court not to discharge the portion of debt associated with the questionable or recent purchase.
If you need help filing bankruptcy, or if you have questions about how filing bankruptcy can help you and your family get a fresh financial start, call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.