Common Mistakes to Avoid Prior to Filing Bankruptcy - Hydra Debt
Common Mistakes to Avoid Prior to Filing Bankruptcy

Common Mistakes to Avoid Prior to Filing Bankruptcy

Filing for bankruptcy security is an anguishing decision some take lightly. Your choice of when you should file bankruptcy is frequently driven by urgent facets beyond one’s control, such as a home that is looming, unexpected task loss, wage garnishments, or a lawsuit.

But you can avoid some major pitfalls that can negatively affect not just you but friends and family as a result of your bankruptcy if you have the luxury of time on your side and can do some planning.

1. You may need to file bankruptcy in the near future, STOP using your credit cards if you think! That you were already insolvent during the 90 days prior to filing bankruptcy whether you ultimately file Chapter 7 or Chapter 13 bankruptcy, a legal presumption is raised. During this 90 days, any new debts you incur, such as new credit card purchases or cash advances, may give the credit card company or other creditor reason to sue you in your bankruptcy case. The Bankruptcy Code gives such creditors the benefit of a presumption that is legal new debts incurred to them during the 3 months ahead of the bankruptcy filing were incurred through fraud. The legal presumption means that the burden of proof switches to the debtor, who must prove that there was no fraud. If the creditor sues over such new debts, just what do they stand to achieve? All things considered, the debtor has already been in bankruptcy, right? The creditor appears to have that debt that is new non-dischargeable by the bankruptcy court. Debt that may otherwise be released, could be announced by the court to be non-dischargeable, and so survive the bankruptcy.

2. when there is any likelihood which you might need to file bankruptcy, do not repay debts to family members or friends. Debts to these “insiders” are suspect under the Bankruptcy Code. If you think about it, most everyone would, if given the choice, pay back debts owed to family members or friends before paying back a debt to any other creditor. Such favoritism is considered by the Bankruptcy Code to represent a “preferential payment,” and any preferential repayment to an insider within twelve months prior to the filing regarding the bankruptcy instance are “set aside” by the bankruptcy trustee, meaning the trustee can force a person’s family member or buddy to provide the payment back even if the repaid debt had been legitimate.

3. If there is the possibility you may need to register Chapter 7 bankruptcy, never try to protect assets such as a home or a car by transferring title to a family member or a friend. While this may seem obvious to most, many mistakenly believe that transferring an asset out of one’s name, or “taking one’s name off of” an asset will protect that asset from one’s creditors in bankruptcy. In fact, transferring title to a valuable asset without receiving fair market value for the property can be investigated as a fraudulent transfer by the bankruptcy trustee. The bankruptcy trustee can sue the member of the family or friend to whom the asset had been moved in order to recover the asset for the bankruptcy property. The upshot? Never ever transfer a valuable asset to a relative or buddy you may file for bankruptcy if you think. Doing so will put your family member or friend vulnerable to case by the bankruptcy trustee.

While avoiding most of these actions will not guarantee that your particular bankruptcy will not encounter any issues or you will ultimately get a discharge, avoiding these errors can avert problems that are major as adversary lawsuits from creditors, demands made against loved ones, or worst of all, costs of fraud against you.

Constantly consult a licensed and experienced Bankruptcy Attorney for appropriate advice about filing for bankruptcy protection.