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7 Things NOT to do before Filing Bankruptcy

4/4/2012

55 Comments

 
While Bankruptcy often is a way for people to eliminate debts and start fresh, filing Bankruptcy is not something to be taken lightly. It is a serious legal proceeding involving the federal court system, and needs to be treated with respect and honesty.

Let's start with what NOT to do. These mistakes can cost you dearly, and in some cases are illegal. Some mistakes can keep you from receiving a discharge of your debts in bankruptcy, and in the worst case, could result in fraud charges being brought against you.

1. First and foremost, it is imperative that you are always completely honest and open with your bankruptcy attorney. Your attorney is ethically bound to assist you. You are also protected by the attorney-client privilege. As such, it is important that your attorney has all the information available to help you. It is important that you answer all questions completely, even if the questions (or answers) are embarrassing or make you uncomfortable. Your attorney is not there to judge you. We are there to get you the help you need.

In our experience, it is very likely that the one thing that most concerns you will not be a problem, as long as the attorney is aware of the facts from the beginning.

2. Don't hide under a rock hoping it will go away. It will not, and failure to answer lawsuits and garnishments filed against you will not help you. If you have dug yourself into a financial hole, the first thing to remember is to stop digging! Seek help from a bankruptcy attorney at the earliest possible opportunity to ensure that you are protected as much as possible.

3. Do not continue using your credit, especially for large purchases. No new accounts, no balance transfers, no misuse of existing accounts. Using credit when you know that you will not be able to repay the loans is considered fraud and can cause you more problems than it will solve.

4. Do not pay off credit card accounts. This is like throwing money away. These debts will be cleared away in most cases, and paying them off will not allow you to keep the accounts open. In most cases, your bank will know that you have filed and will close your accounts no matter what you do. Further, the amounts you pay immediately before filing will often be retrieved by the trustee and paid out to all your other creditors.

5. Do not try to transfer money or property to friends, family members, family trusts, LLC's or anyone else before filing bankruptcy. This could be considered fraud, and is easily repealed by the bankruptcy trustee.

6. Don't touch your retirement accounts. Using retirement money to pay down debt is a bad idea, especially if you are contemplating bankruptcy. Money in retirement accounts, including 401(k)s and IRAs is usually exempt, and therefore can usually be protected from creditors.

7. Do not pay off debts to friends and family members. This will not keep them out of the bankruptcy process. The trustee can go back even further to get money back form so-called "insiders. If the trustee wants to get back sums paid to family, he will sue them for it. This will cost your family even more in the long run, and will cause them even more headaches than they would otherwise endure.

55 Comments
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7/1/2012 04:48:25 pm

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4/15/2013 11:24:37 pm

All assets must be disclosed in bankruptcy schedules whether or not the debtor believes the asset has a net value. This is because once a bankruptcy petition is filed, it is for the creditors, not the debtor, to decide whether a particular asset has value. Thanks.

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4/25/2013 05:12:57 pm

People often become bankrupt due to the mismanagement of money. Money management limits the overspending to an extent and thereby you can preserve money for the future use. It is great to hear that you have some tips to prevent the occurring of bankruptcy by providing some good money investing tips.

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Christopher P. Walker, Bankruptcy Attorney link
7/23/2013 10:25:12 am

It is often true that debtors get themselves in trouble by hiding assets that they would have been able to keep if they simply talked to a good attorney. Bankruptcy advised from an attorney is critical. A good discussion on the hazards of pre-bankruptcy planning

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7/23/2013 05:10:20 pm

You have suggested very nice tips. I also agree that an applicant should not continue using his credit, especially for large purchases before filling bankruptcy. People should be very alert and smart bout it.

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7/24/2013 12:24:33 am

All the things you have discussed here are really so important and should be noted. People should not pay off debts to friends and family members; they should know that this will not keep them out of the bankruptcy process.

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7/25/2013 05:35:40 pm

These all 7 things are so important and notable things which people should really know and note always. I agree that people should not pay off credit card accounts; this is like throwing money away. Credit card users should always take smart decision. These effective ways can really help borrower to become debt free.

Reply
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7/26/2013 02:48:21 pm

Filling bankruptcy is an important decision, so applicant should be very cautious and should have proper mind to do the same. First of all you must provide all the information and details related to your bankruptcy to the attorney.

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7/28/2013 02:57:17 pm

An individual who is going to fill bankruptcy should always avoid these 7 things. People should never touch their retirement accounts before filling bankruptcy. It is not a good decision to pay tour debt from your retirement account.

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7/29/2013 02:54:39 pm

Bankruptcy is a not a dead end, so an individual should not worry a lot about it, he should have patience and take some precautions like you have said in this blog post and then file for bankruptcy. He should use his credit limit very smartly in the situation of bankruptcy.

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7/30/2013 04:20:43 pm

An individual should know these all 7 points which are really so important for a person who is having debt and ready to filing bankruptcy. People should not panic and should not withdraw any amount from his retirement account which is not a favorable decision.

Reply
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7/31/2013 06:05:00 pm

You are saying right people should not do such stupid mistakes before filing bankruptcy, as you have explained here. You should never pay off the debts to your friends as well as your family members. This will never keep them out of the bankruptcy process.

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8/4/2013 03:30:44 pm

Bankruptcy is really a last resort, and only you know whether you need to go this route.

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8/5/2013 03:51:00 pm

Generally people afraid very much before filing bankruptcy, and make many mistakes, actually they should not be panic at the moment of filing bankruptcy. Bankruptcy is not a dead end, so people should not worry a lot they should keep patience and make smart and wise decision.

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8/6/2013 02:55:14 pm

Sometimes people makes many mistakes due to hastiness and confusions, they should not make such mistakes before filing bankruptcy which you have shared in this blog post. I know that bankruptcy is not a good experience but people should make wise decisions and take precautions before doing anything towards filing bankruptcy.

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8/7/2013 05:06:07 am

If you are having bad debt then you should not use your credit and particularly for any big purchases. You should also avoid opening new accounts, and more transferring balance, misuse of existing accounts, etc.

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9/22/2013 03:01:15 pm

In our experience, it is very likely that the one thing that most concerns you will not be a problem, as long as the attorney is aware of the facts from the beginning.

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9/24/2013 04:27:38 am

The tips are very good. I really like that you mentioned the second thing,people are often trying to get problems under rock and that is bad for them because problem is only becoming bigger.

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10/3/2013 09:29:47 pm

Very nice post, This really so helpfull to clearify the problems of bankruptcy and foreclosure. If any body follow these steps before filling the bankruptcy. that person will be safe from banking problems

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10/16/2013 02:40:52 pm

Great Post, nice.For many individuals, filing for bankruptcy relief can provide a way out of debt and a fresh financial start. But whether or not a bankruptcy filing is in your best interest depends on many factors and your individual circumstances. Read on to learn more about what to consider if you are thinking about filing for Chapter 7 or Chapter 13 bankruptcy.

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2/18/2014 07:09:32 pm

I became honored to receive a call from my friend as soon as he uncovered the important points shared in your site. Going through your blog post is a real excellent experience. Thank you for taking into account readers like me, and I wish you the best of achievements as being a professional in this field.

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2/18/2014 09:10:47 pm

If you've got mammary gland yourself into a money hole, the primary issue to recollect is to prevent digging! request facilitate from a bankruptcy lawyer at the earliest potential chance to make sure that you simply ar protected the maximum amount as potential.

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4/21/2014 12:14:32 am

Very helpful tips there. I personally haven't had to file for bankruptcy, but I know people that have and I think the advice here, would have made their life that much easier.

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10/19/2014 03:05:44 pm

This is so unique content that I have been looking for it from couple of days. Your sharing is new and very useful.thanks for sharing this.

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10/28/2016 04:30:55 am

Filing bankruptcy doesn't mean giving up all your possessions. You keep your own property, for example, garments, gadgets, family unit furniture and other absolved resources. Contingent upon your state laws, the type of bankruptcy you file, and your finances, you can sometimes retain larger assets, for example, autos and the family home.

Reply
Mark Murphy link
9/21/2018 07:04:16 am

I really appreciate your tip to avoid using credit if you are filing for bankruptcy! My sister told me that she and her husband have been thinking of filing for bankruptcy so they can reconsolidate some of their debt. I will be sure to tell them that while they are reconsolidating debt, they should avoid using any credit!

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7/16/2019 10:04:44 pm

Bankruptcy laws are very complex. We can’t take any risk or make the bankruptcy procedure harder for ourself. I think we need to consider all the above mentioned advice in your article before hiring a bankruptcy lawyer.

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Bob link
7/17/2019 04:42:38 pm

I love your bankruptcy tips. My wife and I ran out of money. We'll have to consider getting a lawyer for chapter 7.

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Skyler Williams link
8/28/2019 12:37:19 pm

Thank you for your tip to stop using your credit cards and not to take out new accounts. My brother just had to file for bankruptcy. He couldn't pay any of his bills anymore. I will make sure to pass this tip onto him to keep him out of any more trouble.

Reply
Adam Golightly link
3/24/2020 04:43:01 pm

My brother has been thinking about filing for bankruptcy and he wants to make sure that he can get some help so that it is more efficient and safer for him. I'll be sure to tell him about how he should make sure that the lawyer has all of the information to help him and can help him get what he needs by being honest with them. Working with a professional could be really useful for him.

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8/31/2020 11:05:34 pm

I barely have enough money to pay for my mortgage and other debts, which is why I've decided that it would be best to file for bankruptcy. Well, I agree with you that it would be a bad idea to use my credit card in paying for other bills because this may consider as a fraud. Anyways, maybe it would be best to look for a criminal defense lawyer that will help me out.

Reply
Taylor Hicken link
1/26/2021 07:31:44 pm

You made a good point when you shared that it is important to be honest with your lawyer as he or she is ethically bound to assist you with your situation. My friend just mentioned the other day that she is worried about her financial state due to the number of debts that she has collected over the few years due to her bad shopping habits. I will suggest to her looking for a reliable bankruptcy lawyer who can help with her situation and make sure to be honest about every detail.

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Tez link
4/28/2021 04:54:56 pm

I like your bankruptcy tips. I need to get a lawyer. We need to declare chapter 7.

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Chris Pederson link
6/8/2021 05:47:04 am

I'm glad to hear that a bankruptcy attorney not only has to help me but that they are ethically bound to do it. My worry was that they would leave me as soon as the case got difficult. Knowing that they'll always be there helps me know that I have a chance to get out of bankruptcy.

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Braden Bills link
6/21/2021 07:05:52 am

I've been having issues with debt, and I'm not sure what to do about it. It makes sense that I would want to get a bankruptcy attorney to help with this. That seems like a good way to ensure that I get everything put together properly.

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Braden Bills link
9/23/2021 07:51:15 am

I've been having a hard time with debt, and I'm not sure what to do about it. It makes sense that I would want to get a bankruptcy attorney to help me out with this. They would be able to ensure that I do things properly.

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Chance Cook link
9/23/2021 07:53:06 am

I can see why being completely honest with your bankruptcy attorney. They are helping you recover from debt. You need to be honest with them in order to do that successfully.

Reply
Hailey Miller link
10/15/2021 03:08:28 pm

Thanks for pointing out that filing for bankruptcy should not be taken lightly. This is helpful because my husband and I are having financial problems. We are hoping to find a reliable attorney on Monday who can guide us so we can avoid wrong decisions and actions.

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Tex Hooper link
10/20/2021 05:04:15 pm

I like your bankruptcy tips. I need to file for chapter 7. I'll have to hire an attorney.

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Jeff Carbine link
1/5/2022 05:54:02 pm

I never knew that this could be considered fraud, and is easily repealed by the bankruptcy trustee. I never thought that it would be like this, it is an intriguing article to read and I will also share this with my aunt. Thank you for the information about the bankruptcy lawyer.

Reply
Mia Evans link
5/7/2022 01:10:05 am

I totally agree when you said that one should be honest when it comes to consulting with their bankruptcy lawyer to ensure that they can assist you well. I will share this information with my sister because she would need such help this year to save from her debts. She just has this overwhelming debt due to the medical expenses they had because of the condition of her husband.

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Millie Hue link
5/14/2022 11:44:01 pm

It's great to know that a person would be protected by the attorney-client privilege and they will do their best to assist you when you get their help. I will share this tip with my sister because she hasn't decided yet if she will hire a bankruptcy attorney. She would probably need their help more than ever now that her house is actually being used as a collateral already.

Reply
Orange County Divorce Attorney link
6/10/2022 12:13:26 pm

Seek help from a bankruptcy attorney at the earliest possible opportunity to ensure that you are protected as much as possible. I’m so thankful for your helpful post!

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Orange County Family Law Attorney link
6/10/2022 12:30:31 pm

The first thing to remember is to stop digging! Seek help from a bankruptcy attorney at the earliest possible opportunity to ensure that you are protected as much as possible. Thank you for making this such an awesome post!

Reply
Eve Mitchell link
6/13/2022 10:57:29 am

Thanks for the tip about not using your credit card or doing balance transfers. My daughter is currently trying to file for bankruptcy, and she's in over her head. I'm hoping that she will speak to lawyers this week to see if they can help her.

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    John Wallpe has been admitted to practice law in both Oregon and California. Mr. Wallpe's practice includes general civil litigation, consumer law, real estate law and bankruptcy..

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