5 Things to Avoid Before Filing Bankruptcy

Bankruptcy Pitfalls to Avoid…

If a bankruptcy filing is in your near future, be mindful of a few DON’Ts, prior to proceeding:

  1. DON’T surrender to creditor harassment and cash out your 401k or IRA accounts to repay credit card debts: (a) you could potentially realize stiff penalties for removing those funds, prior to retirement age and (b) retirement funds are protected, under the bankruptcy code. Essentially, continue to let your retirement funds grow, while you work, until those funds are later needed to take care of you, when you don’t work (during retirement).
  2. DON’T run up your credit cards or incur large amounts of debt prior to filing, simply because you have “available credit” remaining on your cards or line of credit. To a bankruptcy trustee, this could be misconstrued and result in serious implications, one of which being that your latest shopping spree won’t be dischargeable.
  3. DON’T repay money to friends or family that you previously borrowed, immediately prior to filing bankruptcy. It’s always a good idea to make good on our promises to repay friends and/or loved ones, especially when we might have to call on another favor again someday. However, repaying money to that same family member or colleague, typically within one year of filing bankruptcy, is subject to being taken back by the court’s trustee. Don’t do it or you and the other person will be left shaking your heads.
  4. DON’T file bankruptcy when you anticipate a substantial income tax refund. Without an adequate exemption, which your bankruptcy attorney will assist in determining, the court’s trustee will be ready, willing and able to assist in relieving you of any excess funds you anticipated receiving.
  5. DON’T listen to advice from friends or relatives, regarding binge spending or miscellaneous things to do (before filing bankruptcy), unless the friend or relative happens to double as your bankruptcy attorney. There’s a lot of misinformation available to an eager debtor. However, bankruptcy code changes in 2005 were made to deter debtors from fraudulent filing activity. Trust an actual bankruptcy attorney that knows the facts versus second-hand information about filing from your peers.

While this is not an exhaustive list of things to avoid before filing bankruptcy, it is intended to provide a general overview of select items that most debtors should be mindful about. If you’re seriously contemplating a bankruptcy filing, contact REFUGE Law to address any questions or concerns, relating to additional things to avoid, before your bankruptcy filing. Make an appointment to speak with one of our experienced bankruptcy attorneys. Bankruptcy can help provide you relief from your financial worries. Call us today at (404) 618-2733 in Georgia, (713) 570-6377 in Texas, to discuss.