Bankruptcy proceedings can leave you with mixed feelings. On one hand, you will be free of some of the financial stress, while on the other hand your financial--and in some cases, your personal--life will be on display. To improve your chances of having the bankruptcy turn out as you want, there are some things you shouldn't do in the time leading up to your court appearance. This guide can help you avoid these pitfalls.
#1: Purposefully Racking Up More Debt
It's a good idea to put away the credit cards as soon as you realize that you may need to file bankruptcy. Generally, any type of new debt is a bad idea, including credit cards, personal loans, and auto loans. About the only exception is unavoidable medical bills. Too much recent debt can be used against you by the creditors. They will use it as proof that you are not filing in good faith, which means you may be deemed unable to file for a bankruptcy at all.
#2: Trying to Hide Assets
Whether it's a vacation home, a second car, or a boat, transferring property out of your name to try and protect it during a bankruptcy is asking for trouble. You will be required to show proof of transfer for any assets that disappear before the bankruptcy. If the trustee determines that you transferred property to try and hide it during the proceedings, you can then be prosecuted for fraud. If you feel you have a legitimate reason to transfer property, talk to your attorney to decide the best course of action.
#3: Letting Go Of Assets
In some cases, you may be able to keep your home and car, but only if they haven't already entered into the foreclosure proceedings or been repossessed. Bankruptcy will not get back items that have already been taken. If you are really tight on funds, pay your home payment before the revolving credit cards. Also, keep in touch with your mortgage lender and try to work out payment arrangements – anything to avoid the foreclosure from occurring before the bankruptcy decision.
#4: Be Honest With Your Attorney
Your attorney's job is to help you navigate the paperwork while also ensuring you walk away from a bankruptcy as unscathed as possible. They can only do this if you are honest with them. Do not try to keep any property or funds secret. Not only can then land you in trouble for fraud, it can actually lead to the loss of these items. Just because your lawyer doesn't know about an asset doesn't mean that your creditor's investigators haven't found out about it. If your lawyer isn't aware of something, they won't be able to protect it from the creditors if they discover the asset. Honesty is best, because then your lawyer--like one from Russell & Silver--can take steps to protect the asset for you.