Five Things You Must Not Do While Filing a Bankruptcy!

Posted by Joseph Franks on October 24th, 2019

Bankruptcy refers to a legal status of someone or an entity who becomes unable to pay back debts to the creditors. In most of the cases, the bankruptcy is imposed by the court, the case initiated by the debtor. Sadly, many people plan their financial future when they become on the verge of bankruptcy. No doubt, financial planning is a wise step, however, doing it alone, without any legal and financial help, it can bring disastrous consequences.

There are five common but destructive mistakes people commit that cause problem for bankruptcy cases. So, if you are one of those people who is planning for bankruptcy, make sure you don’t commit these five mistakes:

1. Never Use Credit Cards:

They said it right honest is the best policy. When you are on the verge of bankruptcy, using credit cards when you don’t intend to repay is a fraud which results in criminal charges. When a person uses credit just before filing bankruptcy, there are certain legal benefits that the bankruptcy code gives to credit card companies. The person has to repay the credit he or she uses before bankruptcy, so it is better to consult a bankruptcy lawyer before using a credit card, taking cash in advance or spending credit money.

2. Avoid Transferring Property or Money:

Another mistake many people commit is transferring property just before bankruptcy. If this action takes place, the bankruptcy trustee becomes more interested and curious about your case. Because these trustees always assume the worst-case scenarios and suspect any transfer that takes place. In case of illegal transfers, they are made void by the bankruptcy trustee leading you to lose your legal right to protect your own property, whether your intentions were innocent and you did not intend to hide your property or money. For instance; changing title of property into your child or spouse, which is in your name, removing your name from joint accounts, transferring funds into other's account etc.

3. Don’t Repay Your Debts:

If you have taken loans from your friends and family and also you are intending to file bankruptcy, don’t repay. There are many people who want to pay a few creditors before filing for bankruptcy. For instance, few creditors get paid in full who are nice to the debtors. Paying the normal credits such as bills are not included in such transactions. However, the credits being paid in full to few creditors are not allowed. This act is called ‘preferential transfers’. This can lead a bankruptcy trustee to file a lawsuit against the creditor who was paid in full to get the hold of money back.

4. Don’t Deposit An Unusual Amount into Your Bank Account:

Avoid depositing any money apart from your salary or payment into your account. For instance, you give someone a favor by receiving his or her money in your bank account- this money is not yours but comes into your account.

5. Don’t Cash Your Retirement Plans:

Retirement plans are fully protected by bankruptcy. So, there is no need to cash these accounts while you are planning for filing bankruptcy. Once these funds are moved, you will not be able to protect your money and end up losing retirement funds.

Under the above-mentioned circumstance, don’t hesitate to talk to a bankruptcy attorney and discuss your financial health as he or she can help you well at every step.

Author Bio:

Chicago bankruptcy attorney has dedicated their lives to the craft and stand by your side throughout the entire case, should you have any questions or concerns about the process.