People facing serious financial difficulties often take the view that desperate times call for desperate measures. While that's an understandable outlook for somebody who has been focused on putting out financial fires for a long time, it is generally counterproductive.
Many of the things the average person will do instinctively to try to protect property and personal relationships in the lead up to bankruptcy can cause serious problems. Those problems impact not just the bankruptcy debtor, but also often hurt the people he or she was trying to protect. This post and the bankruptcy do's and don'ts video on this page will provide some basic information about avoiding the most common pitfalls and setting yourself up for success in your bankruptcy case.
However, if you are seriously considering bankruptcy, it is in your best interest to schedule a free consultation with an Arizona bankruptcy attorney before you take any action.
Key Bankruptcy Don'ts
- Don't make fraudulent transfers. This may sound so obvious that you're wondering why I'm mentioning it here. The reason it's important to raise this issue is that many consumers who are considering bankruptcy innocently make payments or transfers that the bankruptcy court will consider fraudulent. Some examples include giving property to family or friends prior to filing bankruptcy, taking out new credit shortly before bankruptcy, for paying debts to people close to you while neglecting credit card bills, medical bills, and other arm’s length debts. In these situations, the bankruptcy court may determine that you have filed in bad faith and are abusing the bankruptcy process, resulting in dismissal. Even when that does not happen, the bankruptcy trustee may take action to undo those payments or transfers, often creating significant complications for you and the friends or family members involved.
- Don't put assets at risk unnecessarily. Some ways in which people filing for bankruptcy may unknowingly put their assets at risk include taking money out of retirement accounts, or otherwise converting exempt assets into non-exempt assets, and maintaining checking and savings accounts with a bank that is also a creditor.
- Don't take advice from anyone but an experienced bankruptcy attorney or other professional. Your friends and family likely mean well, but much of the legal information that is floating around as common knowledge is dead wrong. And, even if someone has filed bankruptcy himself or herself in the past, every case is different. It's equally important that you do not take advice from your creditors or debt collectors. While those in the collection industry may have greater knowledge about bankruptcy and other debt collection issues than your friends and family, it is critical that you remember that their interests are not aligned with yours. Many debt collectors will say whatever they have to in order to get you to do what they want.
Key Bankruptcy Do’s
- Gather information from reliable sources. Some examples of reliable sources of information for those struggling with debt and considering bankruptcy include an experienced local bankruptcy attorney, a non-profit credit counseling agency, information provided by your local legal aid organization or bar association, and the US bankruptcy courts. The more thoroughly you educate yourself the better, but vetting sources of information is critical.
- Provide thorough and accurate information. This applies both to your conversations with your bankruptcy attorney and the documents you provide to the court. Your bankruptcy attorney cannot properly represent you without complete and accurate information. And, failure to provide complete and accurate information to the bankruptcy court in your filings may constitute perjury and/or bankruptcy fraud. Consequences may range from dismissal of your bankruptcy case, to a prohibition of future filings for a period of time, to criminal charges.
- Keep up payments and the bills that matter most. Often when people decide to file bankruptcy, they feel that the pressure is off and they can stop struggling to make payments. While that may be true for certain types of payments, it is not true across-the-board. And, failure to make certain types of payments may have serious consequences, such as repossession of your car. Speak with your bankruptcy attorney before you make any decisions about discontinuing payments.
If you are planning to file bankruptcy, or just wondering whether bankruptcy might be the right solution for you, you can take the next step toward educating yourself right now. Schedule a free consultation with bankruptcy attorney Jeffrey Judge by calling 520-745-1500 or filling out the contact form on this page.