Protect Your Fresh Start

Bankruptcy can offer a much-needed fresh start, helping you eliminate debt and regain financial control. However, success in bankruptcy isn’t just about what you do—it’s also about what you don’t do. Making the wrong moves before or during your bankruptcy filing can create complications, delay your case, or even jeopardize your discharge.

In this blog, we’ll walk you through the essential “don’ts” of bankruptcy to help you avoid common mistakes and protect your path to financial freedom.

1. Don’t Feel Bad About Considering Bankruptcy

Bankruptcy is a legal solution for individuals facing overwhelming debt. Life happens—whether it’s medical bills, job loss, or unforeseen expenses. By filing for bankruptcy, you’re giving yourself the opportunity to:

  • Eliminate debt and rebuild your financial future.
  • Reduce stress and regain peace of mind.
  • Save money for emergencies or long-term goals, like retirement.

There’s no shame in seeking a fresh start—it’s there for a reason.

2. Don’t Use Credit Cards Before Filing

If you’re planning to file for bankruptcy, avoid making purchases on credit cards. Courts may view recent charges as fraudulent or “luxury purchases,” which could make these debts non-dischargeable.

Key Points to Remember:

  • Purchases over $800 for luxury goods or services within 90 days of filing are presumed nondischargeable.
  • Avoid cash advances on credit cards—these can also survive bankruptcy.

3. Don’t Pay Off Creditors Without Legal Advice

Paying off friends, family, or creditors right before filing can create complications. These payments could be seen as “preferences,” which the bankruptcy trustee may demand to be returned.

Examples of Risky Payments:

  • Personal loans from family or friends.
  • Payments over $600 to unsecured creditors within 90 days of filing.

Always consult with your bankruptcy attorney before paying off any debts.

4. Don’t Ignore Requests for Documents

Both your attorney and the bankruptcy trustee will require documentation to process your case effectively. Failing to provide requested information can lead to delays—or even a denial of your discharge.

Documents You Will Need:

  • Tax returns.
  • Bank statements.
  • Pay stubs or proof of income.

Timely cooperation ensures a smoother bankruptcy process.

5. Don’t Sell, Transfer, or Gift Property

Any property sold, transferred, or given away within two years before filing must be reported in your bankruptcy case. Transfers can raise red flags, even if they seem innocent.

Examples:

  • Selling a car to a friend for less than its value.
  • Gifting jewelry or other valuables to family members.

Always discuss these actions with your attorney before making any transfers.

6. Don’t Hide Creditors or Debts

Leaving a creditor off your bankruptcy filing could mean that debt isn’t discharged. Keep a record of all billing statements, collection letters, and outstanding balances to ensure every creditor is included.

7. Don’t Borrow or Withdraw From Retirement Accounts

Your 401(k), IRA, and other retirement accounts are typically exempt in bankruptcy, meaning they’re protected. Using these funds to pay off debt is often unnecessary—and can jeopardize your long-term financial security.

Why You Should Protect Retirement Funds:

  • Bankruptcy can eliminate or restructure your debts without touching your retirement.
  • Once retirement funds are spent, they cannot be replenished.

8. Don’t Refinance Your Home or Take Out Loans

Avoid taking out home equity loans, reverse mortgages, or new debts to pay off old ones. Refinancing your home can put your largest asset at risk and may still leave you needing to file bankruptcy.

9. Don’t Rack Up Debt Before Filing

If you’re planning to file for bankruptcy, stop taking on new debt. This includes payday loans, credit cards, and other forms of borrowing. Courts may view new debt as fraudulent if it’s incurred too close to your filing date.

10. Don’t Hide Information From Your Attorney

Transparency is critical when filing for bankruptcy. Failing to disclose debts, assets, or recent payments could lead to serious consequences, including:

  • Delayed discharge.
  • Accusations of bankruptcy fraud (which is investigated by the FBI).

By being honest and forthright, you’ll avoid unnecessary complications and protect your fresh start.

Final Thoughts: Knowledge Is Power

Bankruptcy can be a powerful tool to regain financial stability, but success depends on knowing what not to do. By avoiding these common mistakes, you’ll set yourself up for a smoother filing process and a stronger financial future.

Share Your Experience

  • Are you considering bankruptcy but unsure how to prepare?
  • Have you made any of these mistakes before filing? How did it impact your case?
  • What questions do you have about the bankruptcy process?

 

Let’s Make Your Fresh Start Happen

Filing for bankruptcy doesn’t have to be overwhelming. Contact our experienced bankruptcy attorneys for a free consultation to discuss your options. We’ll guide you through every step, ensuring your case is handled with care and precision.

Don’t wait—schedule your consultation today and take the first step toward financial freedom!