What Not to Do Before
Filing For Bankruptcy
There’s no denying that the bankruptcy process is demanding and emotional. Yet, the process allows for a new start. While complicated, bankruptcy is the best solution for many people searching for a way to escape crushing financial debt. Making the decision to file for Chapter 7 or Chapter 13 bankruptcy is usually a difficult one because, as with any major decision, there are a number of potential pitfalls.
Our team at the Orantes Law Firm knows what to expect during bankruptcy. We have a proven track record of guiding clients through the bankruptcy process, helping them understand what not to do before filing. If you live in Los Angeles, Orange County, Los Angeles, or Irvine, California, our firm can help by telling you what not to do before you file bankruptcy.
Things Know Before
Filing for Bankruptcy
Bankruptcy laws are often complex; some filers make mistakes before filing a petition at the courthouse. These mistakes can have dire consequences as you move forward with bankruptcy. Some mistakes to avoid include the following:
Don’t Use Your Retirement Account to Pay Off Debts
When faced with debt, many think they can draw from their retirement accounts to pay down their liabilities. This temptation comes because retirement accounts are generally under protection from creditors, but it’s still not a good idea to drain your retirement account to pay off your debts because sometimes that is one of the few assets you have, unable to be touched by creditors.
Don’t Acquire New Debt
Here is another temptation for people trying to keep afloat. Borrowing money you know you can’t repay or you know will be forgiven when you file bankruptcy might be considered fraud. Any debts you take on fraudulently are not included in your bankruptcy. This means you would have to repay those creditors in full after your bankruptcy.
Don’t Move Assets
Another potentially fraudulent action would be attempting to move assets, even if you had no intention of concealing the assets. The reality is that most people are able to keep their personal assets when they file for bankruptcy, so hiding them is completely unnecessary.
Don’t NOT File Taxes
Income tax returns are critical in determining your earnings and assets. Because of this, a bankruptcy case will very likely dismiss if tax returns haven’t been filed for the two years leading up to the bankruptcy filing.
Don’t Misrepresent Your Information
You may have temptations to move, sell, hide or transfer assets before filing for bankruptcy to safeguard them or dispose of them as you see fit. If you do, however, you may be denied a discharge and even subjected to criminal charges. Although there isn’t anything necessarily wrong or criminal about selling some property to pay off debts prior to filing, the bankruptcy trustee will likely ask if any assets or property were sold, transferred, or given away in the year prior to your filing.
Don’t Selectively Pay Off Debts
Making payments to only certain creditors is called a preferential transfer. What that means is the creditor received payment in preference over other creditors that hold the same weight. Oftentimes, the bankruptcy trustee will sue the creditor, called a clawback lawsuit, to get the money you’ve paid them back so that it can be distributed equally and fairly. This process will delay your filing and ultimate discharge.
Don’t File Without Legal Guidance
Simply put, legal guidance is paramount when filing for bankruptcy. The use of a non-attorney "bankruptcy preparer" cannot provide you with legal advice and cannot analyze your situation. Usually, filing unmeritorious petitions eventually get dismissed, causing you to lose critical legal rights.
The Importance of
Experienced Legal Guidance
When filing for bankruptcy (or even considering it), the importance of having an experienced attorney to guide you through the process is essential. If you are looking for guidance through the bankruptcy process, contact us at The Orantes Law Firm today for a free consultation. We proudly offer comprehensive legal services for all types of bankruptcies to clients in Los Angeles County and Orange County, California.