| 5 Common Mistakes Bankruptcy Clients Make | | | | bankruptcy petition. Remember, bankruptcy is for the |
| Bankruptcy is governed by Title 11 of the United States | | | | honest debtor. |
| Codes. Oftentimes, what makes sense in bankruptcy | | | | 3. Repaying an “insider” |
| world does not make sense in everyday life. Here are | | | | It’s a natural instinct to want to pay back family |
| the top 5 mistakes potential bankruptcy clients make. | | | | members, or business associates or other people |
| 1. Selling assets in an attempt to get out of debt | | | | whom you have a close connection to before paying |
| What assets you can keep in bankruptcy is governed | | | | back Discover, Chase or American Express. However, |
| by the specific statutes of each state known as | | | | in bankruptcy, this is considered an insider transfer. It |
| “exemptions.” This sets forth rules regarding | | | | must be disclosed on the bankruptcy petition and the |
| what property you can keep through bankruptcy. | | | | Trustee can go after the insider for the money if it |
| Oftentimes, we see clients liquidate their 401(k), or | | | | was repaid within a certain time prior to filing you’re |
| borrow against it, or sell their assets. Carefully consider | | | | a bankruptcy petition |
| if you can get out of debt by taking such measures. If | | | | 4. Incurring more debt in anticipation of bankruptcy |
| at the end of the day, you still cannot get rid of your | | | | This can happen in two ways. One by tapping into lines |
| debt or get it down to an amount that you can deal | | | | of credit or other sources of credit you may have (for |
| with, it does not make sense to get rid of assets that | | | | example, your home equity line of credit). The debtor |
| would otherwise be protected in bankruptcy. | | | | may unwittingly convert an unsecured debt into |
| The best time to consult with a bankruptcy attorney is | | | | secured. Remember that when you file bankruptcy, |
| when you are struggling to stay afloat and simply do | | | | the duty to repay the debt on a secured debt is |
| not see a way to get rid of all of your debts. | | | | discharged, however, the creditor still has a security |
| Remember, filing for bankruptcy is a tool to shed your | | | | interest in the property, and can exercise its right to |
| legal responsibility to repay the debt. Nothing in the | | | | foreclose or repossess. |
| bankruptcy code prohibits you from voluntarily repaying | | | | If a client maxes out his or her credit card, takes cash |
| the debt after bankruptcy. It’s not about running | | | | advances, takes a trip to Paris, with the anticipation of |
| away from your debt, but taking a responsible step at | | | | filing for bankruptcy, the client may be committing |
| facing your financial situation. | | | | fraud. Bankruptcy fraud is a felony punishable by |
| 2. Getting rid of assets for less than the fair market | | | | prison time. Credit card companies monitor its users for |
| value | | | | “abuse” and can object in the debtor’s |
| Another mistake clients often make is attempting to | | | | bankruptcy proceeding. This will almost certainly mean |
| hide or get rid of their assets for the fear that they will | | | | additional attorney fees, and worse yet, non-discharge |
| lose the asset through bankruptcy. Any transfers of | | | | of your debt. |
| assets prior to bankruptcy must be disclosed in the | | | | 5. |