There’s plenty to do to get ready to file for bankruptcy. There is paperwork to organize, a petition to prepare, and credit counseling to complete. Fortunately, if you’ve hired a bankruptcy lawyer, you’ll receive all the guidance you need to get through the bankruptcy process. Your bankruptcy attorney can also explain what you should not do before filing, such as going on a luxury item spending spree.
Avoid accruing new debts
If you’re looking forward to discharging your debt in bankruptcy and getting a fresh start, now is not the time to begin shopping for expensive jewelry or a new car. The bankruptcy court can deny the discharge of these debts because it can be said that you had no intention of paying them back. Generally, avoid purchasing luxury items on credit cards within 90 days of filing or taking out large cash advances within 70 days of filing.
Avoid transferring your assets
You are required to disclose the details of your liquid and non-liquid assets in your bankruptcy filings. It might be tempting to give your sister your car or hand off your artwork collection to your nephew in order to save these items, but you should know that this can lead to the denial of your discharge and possibly criminal penalties.
Avoid making preferential payments
You might think that paying back certain creditors before you file for bankruptcy is a demonstration of your commitment to “do the right thing.” But in fact, this might be considered a preferential payment or transfer by the bankruptcy court. The bankruptcy court will consider whether you paid back loans to family and friends within one year of filing or selectively paid back some creditors within 90 days of filing. If so, the trustee may initiate an adversarial action against this person or entity to reclaim the money for appropriate disbursement.
When you become a client of Cutler & Associates, Ltd., our team of dedicated bankruptcy lawyers will walk you through the bankruptcy process step-by-step. We’ll provide guidance on what you should and shouldn’t do before, during, and after the bankruptcy proceedings.