Bankruptcy can change the way you live. However, if you want it to not affect your life negatively, it is important to know what to avoid prior to filing for bankruptcy. According to lawyers of Los Angeles based bankruptcy law firm Recovery Law Group, many people skirt around bankruptcy laws in order to protect their assets. It is important to understand that the bankruptcy court does not approve of certain tactics, usage of which might result in the dismissal of your bankruptcy petition or filing of criminal charges against you. the latter might cost you dearly, not just in terms of finances but also a time in jail. These are some of the common mistakes you should avoid prior to bankruptcy filing –
- Hiding your assets
While filing for bankruptcy, you are expected to declare your income as well as your assets to find out your ability to pay off your creditors. Chapter 7 bankruptcy requires you to pass a means test in which your monthly income should be less than the state median for a household of similar number of members. Since Chapter 7 results in the discharge of all debts, people often hide their assets in order to qualify for it. If bankruptcy trustee discovers you are lying about your assets, this could result in dismissal of your case, or you might be banned from filing for those debts again. Similarly, hiding creditors won’t help you either.
- Not hiring a lawyer
Bankruptcy laws are quite complex. trying to handle your bankruptcy case on your might not be the best thing to do. You might end up missing one of the final details which might be the difference between getting your bankruptcy discharged or getting your case dismissed. Attorneys are aware of the various ways in which you can protect your assets. They can also you help you choose the best chapter to file bankruptcy under. Moreover, they can make you aware that certain debts are not discharged even after bankruptcy, such as child support, income tax debt, student loan, etc. It is therefore advisable to contact expert bankruptcy lawyers at 888-297-6023 to get rid of debts.
- Transferring property to family or friends
Giving assets to family or friends in order to protect them from becoming a part of your bankruptcy estate, can have repercussions on your bankruptcy case. In case you have sold it at less than the market rate, the deal can be turned over by the bankruptcy trustee.
- Running up huge credit
If you run the risk of accumulating a huge amount of debt on credit cards just before filing for bankruptcy, it is construed as fraud. The creditor can challenge the discharge of debts if they believe you were trying to cheat them. This will result in the debts remaining even after your bankruptcy ends. Any credit card purchase made 90 days prior to filing for bankruptcy is not included in the debts. You might have to end up paying those creditors and could also be accused of fraud. Similarly, avoid taking on new debt of you are contemplating to file for bankruptcy.
- Raiding your pension funds
Most people do not realize that their pension funds are protected from creditors through exemptions. Using money from those accounts to pay your creditor is a bad move, especially since you are using protected money to pay off debts which might be discharged during bankruptcy. Additionally, paying one creditor while ignoring others is not advisable. Pension accounts like 401(k), IRAs, etc. are exempted and cannot be touched by even bankruptcy trustee.