If you have found yourself financially overextended and have reached a point where the damage is unrecoverable, you may be thinking about filing for bankruptcy. After all, when the bankruptcy is complete, you will finally be able to breathe a little bit easier. However, whether you're still trying to decide if it's the right option or you have decided but haven't filed yet, you need to be careful about how you handle some financial things in the meantime. Here are a few things to keep in mind along the way.
Don't Take On More Debt
If you are facing the potential for bankruptcy, especially if you think you might be filing soon, it is imperative that you not take on any additional debt. While you might already have reasoned that you shouldn't apply for any loans or get a car right now, one of the things many people overlook in this process is their credit cards.
Taking on more debt also includes adding to your credit card balances. Given the fact that a bankruptcy consideration often means you are short on money, it's tempting to max out your credit cards before you file, whether through a cash advance to make ends meet or just through shopping trips. Unfortunately, this kind of activity can be viewed as fraudulent by the bankruptcy court, and it can result in your bankruptcy being denied. If you are even considering bankruptcy, stop using your credit cards immediately.
Don't Pay On Any Debt
It may sound counterintuitive to say that you shouldn't pay on debts, but if you are considering bankruptcy, it is actually sound advice. If you decide to take the last of your available cash and pay off an outstanding debt before you file for bankruptcy, that payoff can be viewed as preferential by the bankruptcy court. They actually have the legal right to sue that creditor for your payment so that they can disburse it among all of your creditors instead. To avoid any potential problems like this, it is important that you not pay on any of your debts while you are considering bankruptcy.
Don't Get Rid Of Your Assets
In some forms of bankruptcy, some of the assets that you hold will be liquidated by the bankruptcy trustee to help pay off your debts. Some people are afraid of losing things, like a home they own outright, in the bankruptcy process. In an effort to protect those things, they will sign them over to a loved one before they file.
Doing this can be viewed as fraud in the eyes of the court. It can look like an attempt to hide assets, which is illegal. In addition, transfers like this are often unnecessary to protect the assets because there are some asset exemptions that can allow you to keep certain things anyway.
Don't File Any Other Lawsuits
If you are considering bankruptcy because of a personal injury or similar situation, you may also be in talks with a personal injury attorney. Remember that any legal awards can also be claimed, or at least a percentage of them, to pay down your debts. Before you file any kind of lawsuit, you should discuss it with a bankruptcy attorney. That way, you will know exactly how the award would be handled as it relates to your bankruptcy case as well as the lawsuit itself. In addition, if you do file any kind of lawsuits, make sure that your bankruptcy trustee is aware of it. Otherwise, that can also be seen as an attempt to hide future assets, which could derail your bankruptcy filing.
To learn more about bankruptcy law, get in touch with an attorney today.
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