Common Mistakes When Filing Bankruptcy

There are many mistakes I have seen my clients make prior to filing Bankruptcy. These mistakes can be prevented by being honest with your Attorney and with proper planning and discussion with your attorney. Some of the most common mistakes are the following:

1. Leaving out a creditor.  Many clients intentionally leave out a Creditor. Common reasons are being afraid that the Creditor will repossess their property, or that the Creditor has been “good to them” and hoping that they can handle the debt on their own. Failing to list a Creditor always comes back to haunt a client. The law requires that all your creditors be listed, so that all creditors are treated equally. Don’t forget to list any co-signed liabilities you share with another party as well.

2. Waiting until the last minute to file. Don’t wait until your wages are Garnished or your Bank account is levied. If you see the writing on the wall, then the sooner you file, the sooner you can obtain financial relief and regain control.

3. Filing bankruptcy when you are expecting a large tax refund. Tax refunds are as good as cash in the Courts’ eyes. If you expect to get a large tax refund in the near future, be sure to tell this to your attorney before your file your case. Generally your case can be structured to retain the refund, but proper planning must be made ahead of time.  

4. Making large purchases on your credit card before filing. Do not make large purchases on any credit accounts within 90 days of filing. Doing so is generally considered fraud.

5. Transferring assets before filing. Many clients transfer their property to relatives, thinking it will keep the property out of the Bankruptcy Court’s reach.   This is the worst mistake anyone can do. Not only could such a transfer be undone by the Court, or the case dismissed without discharge, but many times the property would have been protected under bankruptcy if the transfer did not occur. Once the transfer occurs, the property actually becomes un-protectable!