3 Things To Be Careful About Before Filing For Bankruptcy

Posted on: 28 April 2017

If you are planning on filing for bankruptcy soon, you need to be careful about the financial choices that you make leading up to official filing for bankruptcy. Here are three things that you need to watch out for before filing for bankruptcy.

#1 Getting Rid Of Assets

The first thing that you need to be careful about is getting rid of assets. Although you may think that it is a good idea to get rid of your assets to pay off your debts, the bankruptcy courts may look down on your actions, especially if you sell the assets to your family members or if you sell the asset for less than it is worth.

It can look like you are trying to safeguard your assets and hide them from the courts. This is frowned upon by the courts, and could harm your chances at a successful bankruptcy case. The courts can even undo sales that you made of assets. So be careful about getting rid of assets in order to pay down your debts; check with your bankruptcy attorney before you make such a choice.

#2 Maxing Out Your Credit Cards

Second, you should not apply for new credit cards right before you plan to file for bankruptcy. You also should not suddenly make more charges on your credit cards than you have been making in the past. If you suddenly max out your credit cards, it is going to look suspicious. Although there is a chance that your credit card debit could be forgiven in bankruptcy court, it will be looked upon poorly if you run up your credit cards right before filing for bankruptcy. If your credit card debit has been around for a while, it does not look bad – just if you pile it up right before applying for bankruptcy. That makes it look like you are working the system and are trying to get free money via bankruptcy. This will be seen as fraud by the court system.

#3 Get Rid Of Your Retirement

Third, do not touch your retirement. Do not tap into your retirement to pay your expenses and to pay down your debt. Retirement is one of the few things that is generally protected as you go through bankruptcy. The courts want to find a way for you to pay what you can to your creditors and get back on your feet; they don't want to take away your ability to take care of yourself in your old age. The court system generally allows you to keep your retirement savings and will not force you to use it to pay down the debit that you are dealing with. So don't tap into your retirement yourself and lose the protection that the court will provide you with.

Talk to a bankruptcy attorney about any financial decisions you are thinking about making in the days and months leading up to official filing for bankruptcy. You don't want to harm your assets, like your retirement, or do something that could be considered to be fraud and ruin your bankruptcy case.