16th Jun 2017



Your financial behavior immediately preceding a bankruptcy application is just as important as how you behave during the bankruptcy itself. Understanding what is expected of you and acting accordingly will get you the best outcome. Consult with a bankruptcy attorney to best understand the pitfalls commonly encountered when filing for bankruptcy protection.


This list cover 9 things NOT to do before you file for bankruptcy.


Don’t Abuse Your Creditors


DON’T repay loans from friends or relatives. Repayments to an “insider” (which includes relatives, friends, and business associates) within the year preceding you file bankruptcy is deemed “preferential treatment.” Your bankruptcy trustee will “scratch back” and repayments deemed preferential and divide them funds between all of your creditors. Preferential payments also include those of $600 or more made in the 90 days before your case is filed.


DON’T communicate directly with your creditors after you have filed for bankruptcy. They must communicate directly to your bankruptcy attorney. If any creditor attempts to communicate directly with you by any means, do not respond and instruct your attorney immediately.


DON’T leave a single creditor off your petition, make sure every debt in included. All debts can be reaffirmed or repayed once you receive your bankruptcy discharge. You must list every single one of your debts and all of your assets in your bankruptcy schedules.

Don’t Abuse Your Credit


DON’T allow new bills to accumulate before you file. If you max out on your credit cards or take out a new loan before you file, the court could find your petition to be fraudulent and dismiss it, or exclude those new debts from being included in the discharge.This will only make things worse.


DON’T treat yourself or others to any not vital or luxury items before filing for bankruptcy. Only use credit to purchase items which are necessities.


DON’T take on or withdraw from 401k, IRA or ERISA qualified savings and retirement plans in order to pay your bills. Premature withdrawal of these funds will result in fines and taxation. You will not be able to discharge those costs through your bankruptcy. In general retirement accounts can be fully exempt in your bankruptcy.


DON’T take a loan secured against your home for payment of unsecured debts such as credit cards, utilities, or medical bills. You may be converting debt which would have been discharged in bankruptcy into debt which you will still have to pay to prevent the loss of your home.


DON’T transfer your assets or property another person to avoid having to list them as assets. Transfers or ‘gifts’ such as these will need to be included in your Statement of Financial Affairs. The Bankruptcy Code deems actions like these to be fraudulent, this can result in denial of your discharge. Your bankruptcy trustee will most probably void the transfer and recover the assets or property.


DON’T attempt to sell your property for a lower price than its true value. This will not reduce the total repayments. Most likely or the subsequent purchaser will be required have to pay the shortfall.


If you want to discuss this topic further, please contact me at 281-847-4345 or rkemsley@kemsleylaw.com so we can discuss your individual situation and see if Chapter 7 or Chapter 13 would work for you and how we can help you set up a plan to pay the required fees.  The consultation is free.  Take the first step by calling me today.  I look forward to hearing from you soon.

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