Filing for Bankruptcy: What NOT to Do

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As with every significant decision in life, there are certain tasks that you must do when filing for bankruptcy, and there are actions that you are advised to avoid like the plague. The bankruptcy trustee assigned to your case is going to microscopically comb through all of your behaviors in the year immediately preceding your filing, so it is of the utmost importance that you work diligently to adhere to the following points of advice:

  • DON’T cash out your retirement savings. Any creditors to whom you are indebted cannot touch any of your retirement accounts because they are considered exempt in bankruptcy under certain specific sections of tax code. This includes 401(k)s, 403(b)s, and most IRAs. Taking your retirement savings out of these accounts in order to put them into your bank account and spend them is a bad idea. Your dollars will no longer be safe once they are released from your retirement resources.
  • DON’T pay money to family in the hopes of recovering that money secretly after you have filed for bankruptcy. That transaction will be discovered during your bankruptcy case, and it will be considered a deceptive and fraudulent move on your part, which can be reason enough to dismiss your case altogether.
  • DON’T continue to make payments on your dischargeable debts, like credit cards. Why put any more money toward a debt that you will likely be released from when your bankruptcy is complete? Be smart and don’t throw money down the drain.
  • DON’T overuse your credit cards. Many people who have gone before you have made the grave mistake of maxing out their credit cards immediately before filing for bankruptcy, with the thought that it is basically free money because your debt will be dissolved in your bankruptcy matter. This is considered bankruptcy fraud and will be discovered at some point, which will probably lead to your case dismissal.
  • DON’T go without a qualified and experienced bankruptcy attorney. You’ve seen ads and heard estimates of paralegals who will prepare your bankruptcy filing for a small fee. It seems too good to be true, right? That’s because it is! Do not enter into a bankruptcy case without a lawyer. To do so would be extremely risky to the outcome of your case.
  • DON’T transfer any of your property. To do so looks very suspicious, and the bankruptcy trustee assigned to your case will view this action as an attempt to defraud the court.
  • DON’T file immediately before receiving a significant inheritance or tax refund. Timing of filing your bankruptcy matter is important, and it should be discussed with your New Jersey bankruptcy attorney.
  • DON’T gamble. Whether it’s hitting the casinos in Atlantic City, or placing your entire paycheck on the trifecta at the racetrack, avoid all betting until much, much later (preferably never).
  • DON’T marry your sugar daddy. (Or sugar mama) All joking aside, don’t get married immediately before filing a bankruptcy petition if your potential spouse earns significantly more money than you do. The bankruptcy court will take his or her income into account when determining your ability to repay your debts.
  • DON’T lie to your attorney or to the bankruptcy trustee. To do so will most likely result in your case being dismissed and will prevent you from ever being able to file bankruptcy on your current debts in the future.

Pssst… If you are reading this information a little too late, there may still be a way to fix your mistake. You will want to contact a bankruptcy lawyer in New Jersey ASAP in order to discuss your options. He will be able to help you decide whether to file at a later date, switch your Chapter 7 to a Chapter 13, or pursue other avenues in order to resolve your debts and get you to a financial place that feels good and works for you.

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10 Responses to Filing for Bankruptcy: What NOT to Do

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