If you are considering filing for bankruptcy relief, below are some useful pointers which may help your case go more smoothly.
- Do not repay relatives or friends before filing bankruptcy
In times of financial stress, banks may be hesitant to loan you money whereas family and close friends may be more likely to lend a helping hand. It is understandable that you would want to repay your family and friends over your other creditors, especially because you have a close relationship with them. However, bankruptcy law prohibits this. Relatives and close friends are considered “insiders” and repayments to insiders within the year prior to filing for bankruptcy protection are considered preferential transfers or preference payments, which can be reversed by bankruptcy trustees for the benefit of your other creditors.
The court does not want debtors to give preference to creditors who are insiders (such as family or friends) over other creditors, such as banks. All creditors are to be grouped together and be either wiped out entirely or receive a pro rata share that is fair to all unsecured creditors.
- Do not get rid of assets
Bankruptcy courts look closely at assets (including but not limited to real estate, businesses, vehicles, and cash) that a debtor had, generally, four years before filing for bankruptcy protection. If those assets are no longer in the debtor’s possession, trustees will likely dig deeper to make sure the debtor did not give these assets away or temporarily put them in someone else’s name to hide these assets from creditors. This is called a fraudulent transfer and it can be avoided or reversed by the trustee. It can sometimes also lead to objection to the bankruptcy discharge or even litigation against the insider to whom the assets were transferred. If an asset was sold for fair value and/or the debtor was not insolvent at the time of the transfer, and not rendered insolvent thereby, then the transfer may be acceptable. However, this issue should be examined closely. If this is your case, you should speak with an experienced bankruptcy attorney to determine whether you should file bankruptcy, which chapter, and when.
- Do not shop ‘till you drop
Incurring new debt or racking up credit cards right before filing bankruptcy, with no intention of repaying these new debts, is considered fraud. Creditors may object to the discharge ability of these debts in your bankruptcy case and you may end up owing these forever until they are paid off. Similarly, it is frowned upon to buy luxury items such as expensive cars, jewelry, or a lavish vacation, right before filing for bankruptcy.
- Do not take cash advances from your credit cards
If you take out cash advances higher than $925 from credit cards within the 70 days before filing for bankruptcy relief, there is a higher chance that this debt will not be wiped out. A cash advance within the 70 days before filing bankruptcy and which is higher than $925 creates a presumption of fraud (in other words, it is presumed that you did not intend to repay this debt). This presumption can be proven to be wrong; however, unless there is an emergency, it is better to wait to file to avoid the issue altogether.
- Disclose, Disclose, Disclose
When filling out the bankruptcy paperwork, you are required to provide complete, accurate, and truthful information regarding your assets, liabilities, and financial situation, under penalty of perjury. If you are considering filing for bankruptcy, it is important that you speak with an experienced bankruptcy attorney in your area and be as open and honest as possible so that he or she may be able to better assess your particular situation and goals and guide you in the right direction to a smooth and stress-free path to debt-relief.
For more information about bankruptcy relief, please visit our website here.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 1,800 homes from foreclosure, eliminated $100,000,000 in mortgage principal and consumer debt, and have collected millions of dollars on behalf of our clients due to bank, loan servicer, and debt collector violations, negligence and fraud. Contact us for a free consultation to see how we may be able to help you.