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Four Things Not to Do Before You File for Bankruptcy

Posted on in Bankruptcy
Four Things Not to Do Before You File for Bankruptcy

In an earlier blog post, we discussed the steps you should take before you file for bankruptcy. If you are at the point where your personal debt has become so unmanageable that you are considering bankruptcy, there are ways that you can either seriously hurt or help your financial situation before you file your bankruptcy with the court. Some of these things you can do are specific to your situation and can be explained to you in detail by a financial advisor or an experienced bankruptcy attorney. For most people, avoiding the following actions in the weeks, months, and days leading up to filing for bankruptcy can make the process much easier.

Do Not Move Your Assets

Your assets, which can include physical possessions like cars and recreational items, and your financial assets, like your bank accounts and investments, are used to determine your net worth. When you file for bankruptcy, the court assesses your net worth and your disposable income level to determine a realistic debt repayment plan for you. Moving your assets in an attempt to “protect” them from the court can result in your discharge being revoked.

Selling assets is perfectly legal, though, as long as you can provide documentation of the sale to the court as part of your statement of financial affairs.

Do Not Repay Creditors Outside of Your Bankruptcy Plan

Although it might seem like a good idea to start repaying your creditors as soon as possible, wait until your bankruptcy case is filed and you are working with a court trustee to start paying back your debt. This can be deemed a “preferential transfer,” which can be undone during the repayment process.

Do Not Continue to Accrue Debt

This means using a credit card or taking out new loans. This can be interpreted by the court as an attempt to commit bankruptcy fraud. When you are seeking bankruptcy, you need to prove that you are serious about getting your debt level under control. You could even be denied a discharge on certain debts if they were taken out within 90 days of filing for bankruptcy. To avoid running into this issue, keep your spending to a minimum in the weeks leading up to bankruptcy, using cash or a debit card to only make necessary purchases like groceries and fuel.

Do Not Ignore Your Creditors

If you plan to file for bankruptcy, tell this to your creditors. They might have begun the process of garnishing your wages, foreclosing on your home, or repossessing your vehicle. Stop these processes by communicating your intention through your attorney.

Work With an Illinois Bankruptcy Attorney

If you are reaching the point with your debt that filing for bankruptcy could soon become a reality, work with an experienced bankruptcy attorney to make the process as painless as possible. Our team at Newland & Newland, LLP can help you through this process by advising and guiding you through each step of your bankruptcy.

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