MISTAKES
TO AVOID
1.
Waiting Too Long
It is human nature
to put off unpleasant events like bankruptcy. No one wants to file bankruptcy. Most people feel terrible about filing bankruptcy so they postpone bankruptcy as long as possible.. Waiting too long to file gives your creditors the opportunity to seize your assets by garnishment and levy. Also, people who postpone bankruptcy often deplete protected assest such as their retirement funds and are left after filing with no savings. Wage garnishment, foreclosure,
and repossession ca all be stopped by filing bankruptcy before
creditors begin these collection actions.
The purpose of bankruptcy is to help you recover from financial difficulty, and waiting too long to file makes recovery more difficult.
2.
Getting a Second Mortgage Instead of Filing Bankruptcy
Many clients try to
put off inevitable bankruptcy by obtaining a second mortgage
to pay off their unsecured debts. If you cannot make your
first and second mortgage payments, you can lose your home.
It is not wise to risk your home for the benefit of unsecured creditors.
3.
Depleting IRA and 401K Plans to Pay Creditors
In Florida, your IRA
and 401K plans, as well as other tax qualified plans, are exempt
assets. You can file bankruptcy and still keep all of
your retirement savings to help reestablish your normal lifestyle
after bankruptcy. Do not sacrifice your retirement security to pay your unsecured creditors. Eventually, you may still have to file bankruptcy, and in that case, there is no benefit to having depleted retirement funds in an effort to postpone filing.
4.
Filing When You Have a Substantial Tax Refund Pending
The exemption for inome
tax refunds is limited, and an ill-timed bankruptcy may jeopardize
your refund. You should discuss any expected refunds with
your attorney before filing.
5.
Reaffirming Burdensome Debt
Reaffirming (keeping)
loans trhough bankruptcy will make it difficult or impossible
for you to recover financially. Don't keep credit cards
with significant balances. Banks will send you new credit
cards after your bankruptcy is discharged.
6.
Failing to List All Creditors
A creditor you forgot
to list on your bankruptcy petition may not be discharged.
You should list all creditors, even if you intend to repay the creditor.
You must also include debts owed to family members and
other insiders.
7.
Large Credit Usage Shortly Before Filing Bankruptcy
You must tell your
attorney if you have taken significant cash advances, made balance
transfers, or made other large purchases within the prevoius
three (3) months.
8.
Paying Back Loans to Family Members Before Filing Bankruptcy
People generally do not want to file bankruptcy against their family members or business partners so they sometimes repay these loans before contacting a bankruptcy attorney. Repaying loans to
family members (or insiders) within one year of filing bankruptcy
should be avoided. The Trustee can sue your family members
to recover sums paid to them within the past year.
9.
Transferring Non-Exempt Assets To Others
Assets transferred
in anticipation of filing bankruptcy may be recovered by the
Trustee as a fraudulent conveyance. Giving away money
or other assets to your children, parents, or siblings will
not protect the assets from the bankruptcy trustee, and such
transfers may jeopardize your bankruptcy discharge. The trustee may sue your family members to reverse such transfers.
10.
Ignoring Letters From the Court and Your Attorney
Any notice or letter
you receive either from the Bankruptcy Court or your attorney
is important. Failure to respond to a communication may
have adverse consequences. There is probably a good reason why your attorney is trying to contact you or is asking you for information and documents.
