These are common Mistakes people often make before filing for bankruptcy!
DON’T spend extra money right before filing for bankruptcy.
All over mid-Michigan, people think they can run up their credit card bills or get cash advances right before filing for bankruptcy because their debts will be discharged anyway. This is a false assumption.
In reality, certain debts incurred within 90 days of filing for bankruptcy won’t be forgiven. These debts are non-dischargeable, meaning that you will have to pay them all off eventually. Long ago, the bankruptcy courts figured out that sometimes people try to advantage of the system. Now, more than ever, the bankruptcy judges in Michigan are wise to that game. Don’t do it; it won’t work.
DON’T transfer property out of your name.
Sometimes, people think that they can hide their properties or assets by transferring them to family members and not declaring them during bankruptcy. This is also a false assumption. In fact, your bankruptcy trustee has the power to reverse the transfer if they believe that the transfer was made in effort to hide these assets from creditors.
In addition, trying to hide your assets would actually be a waste of time. This is because there are many bankruptcy exemptions that allow people to keep their car or at least some of the equity in their case.
For other valuable possessions there are also exemptions. There are larger exemptions that allow people to continue living in their homes. In the end, nobody wants to punish a person that is forced into bankruptcy so long as everything is done above board.
Similarly, it would be a bad idea to withdraw your retirement funds – whether in attempt to stave off creditors, or in attempt to make it appear like you have less assets. The government has protections in place for your retirement savings, meaning that you likely won’t lose them during bankruptcy. Most retirement funds qualify for this exemption, such as ERISA qualified accounts.
DON’T ignore pending lawsuits.
Debtors sometimes believe that filing for bankruptcy automatically protects them from other lawsuits. In reality, all pending lawsuits must be dealt with, even if the debtor is also filing for bankruptcy. It isn’t until your bankruptcy case is actually filed that you will be protected from other lawsuits.
Therefore, you should respond to all pending lawsuits even if you are planning on filing for bankruptcy. This can help protect your property from liens and protect your rights. Act quickly, meet with your bankruptcy lawyer and give your lawyer copies of all lawsuits, bills, liens, judgments and garnishments.
DON’T ignore your creditors just to pay back loans to friends and family.
If you’re filing for bankruptcy, your creditors have to be treated equally. This means that each creditor in a specific class of debts, gets a proportionate share of the funds you are paying out to them. We know that you may feel more indebted to your friends and family than to a creditor, but paying your friends first will end up being a futile action.
This is because, if you pay your friends and family within a year of filing for bankruptcy, your bankruptcy trustee is allowed to recover those funds from your friends and family and redistribute the money to your creditors.
In other words, if you give money to your friends and family, your friends and family aren’t going to be able to keep the money. This is called giving them preferential treatment. Likewise, you cannot choose to pay certain creditors but not others. Bottom line is that you need advice from your bankruptcy attorney before making any financial decisions.
DON’T withhold information from your attorney.
Your bankruptcy attorney needs to know all relevant information about you and your case to be able to give you adequate protection. If they find out crucial information later on, or find out that you had assets that you were hiding, then their job will become significantly more difficult. This means more expense to you. It might also mean that your bankruptcy case gets dismissed by the court. Worst case scenario is that you get charged with the federal crime of bankruptcy fraud.
If you are thinking about filing for bankruptcy, contact us today! Our expert attorneys have been helping people in Mid-Michigan and around Lansing for decades. Call our main office to set an appointment with a top bankruptcy attorney. Call us at 1-517-886-1000.