Filing for Bankruptcy: Keep These Dos and Don’ts in Mind
Filing for bankruptcy in Florida can be a complex process. This article looks at the dos and don’ts involved, and how a bankruptcy lawyer could help you.
If you are struggling with overwhelming debt, filing for bankruptcy could be a powerful remedy. Before you make a move to take advantage of the protections available in a bankruptcy filing, it’s important to be aware of the things that you should and shouldn’t do. What follows are the dos and don’ts to keep in mind when filing for Chapter 7 bankruptcy.
Things you should do filing for bankruptcy
Hire a competent bankruptcy lawyer: The laws governing bankruptcy can be so complex that it can be impossible for a non-expert to be aware of all the rules involved. Before you make a move of any kind, it’s important to get in touch with an experienced bankruptcy lawyer (not someone who’s just a bankruptcy preparer) to seek their advice.
Tell your lawyer everything: When you first sit down with your bankruptcy lawyer to talk about your options, you will need to answer a number of questions. Your lawyer needs to know exactly where you stand. It’s important to hide nothing from your lawyer — even if the truth is embarrassing — so that they are able to give you legally sound advice.
Know what your non-dischargeable debts are: The bankruptcy process doesn’t help you put every kind of debt behind you. You need to be aware that student loans, and some kinds of income tax, among other debts, will continue to stay with you post-bankruptcy. You need a plan for how you will pay off these debts.
Don’t fall behind on your payments: When you plan to file under Chapter 7, it may occur to you that you might as well stop making your car and home payments. It’s important, however, to stay current.
Things you shouldn’t do filing for bankruptcy
Don’t move your assets in someone else’s name: Attempting to hide your money and assets by transferring them to friends or relatives may sound like an easy way to keep them out of the reach of the bankruptcy court. However, this kind of activity is considered bankruptcy fraud. however. If the court gets to know of such activity, it can deny you relief under bankruptcy law. Federal law dictates that any individual proven to have knowingly and fraudulently concealed assets, made false oaths/claims or engaged in bribery in relation to a bankruptcy filing is guilty of a felony punishable by a fine of up to $250,000 and/or up to five years in prison.
Don’t withdraw from your IRA or 401(k): Assets in retirement funds are safe from the reach of bankruptcy proceedings. You don’t want to withdraw money from these sources to pay off credit card bills. Using your retirement funds or home equity to pay off unsecured debts can attract taxes, and even put you at risk of losing your home.
Don’t take on more hours at work: It might occur to you to take on more hours at work for extra money to pay your debts off with, but it may make you ineligible for relief under Chapter 7.
Don’t take out new loans: Some people filing for bankruptcy assume that all debt they take out is likely to be forgiven in the process and go ahead and run up new debt. It’s important, however, to stop using your credit cards. Not only is charging expenses to your cards at such a time considered fraud, but such debt could turn out to be non-dischargeable, as well.
Don’t negotiate with your credit card issuers: If you’re going to file for bankruptcy, negotiating debt reduction with your card issuers can be a mistake, because it can increase what you owe to the IRS.
Don’t pay off personal loans: Repaying loans over $600 to unsecured creditors – friends, family, and so on – isn’t a good idea. When you file for bankruptcy, the process creates an ordered list of creditors to repay. It’s important to be prepared to take the court’s list seriously.
Preparing for bankruptcy is, in many ways, a non-intuitive process. It’s important to plan every move that you make with an experienced bankruptcy attorney guiding you.