Tips to Follow Before Filing for Bankruptcy

When a person considers bankruptcy, they may accidentally do something that can harm their case. It’s best to consult a lawyer before going through debt elimination bankruptcy, but even before that, clients should avoid these transactions to ensure a smooth filing and avoid creditors’ challenges.

Don’t Transfer Property or Money

Many believe that transferring assets to others will keep them safe. However, the opposite is true, and these transfers can lead the court to suspect fraud. The following transfers may get a person in trouble:

  • Putting a car in a spouse’s name
  • Changing the name on a bank account
  • Eliminating one’s name as a business owner
  • Moving funds into others’ bank accounts
  • Deeding property in someone else’s name

Many move funds and property out of their own name, but the ownership of assets doesn’t mean that they’ll be lost. An attorney can tell a client how to deal with their exposed assets during bankruptcy.

Don’t Pay Off Creditors

Some consumers want to pay creditors off before filing for bankruptcy protection. While it’s OK to pay bills as normal, paying an extraordinary amount to any creditor can lead to allegations of a preferential transfer. In some instances, it can lead to a clawback lawsuit, where the trustee sues the creditor to get the funds back.

Stop Using Credit Cards

Unless a person needs to use a credit card for necessities like housing, food, or gas, they should stop using credit cards altogether. However, they can still use debit cards that are drawn on a bank account.

Don’t Sue Anyone

All legal claims are assets that can be seized during bankruptcy, even if a case is unresolved. Even a claim that hasn’t yet been filed is part of the bankruptcy estate. If a person has a pending claim, they should consult a lawyer before filing.

Delaying Filing

Most of these mistakes can be resolved by putting off the filing. There are look-back periods for many transactions, which means that the court will examine only those within a certain time before the filing. By putting the process off, one may be able to avoid some problems. Call the firm today to set up a consultation or visit the website to learn more.