Filing bankruptcy can bring welcome relief for those dealing with unmanageable debt. Unfortunately, many people take actions before bankruptcy that can negatively impact them in the long term. If you have questions about bankruptcy or need someone to talk you through the process, contact our Charlotte bankruptcy lawyers at the Law Office of Jack G. Lezman for a free and confidential consultation. Call us today.
Avoid these seven things if you’re considering filing bankruptcy in Charlotte, NC:
Obtaining New Debt
When you’re contemplating filing bankruptcy, you’re likely already having difficulty paying bills. It can be tempting to open another credit card or take out a personal loan to cover costs. However, obtaining new debt within 12 weeks of filing bankruptcy can result in fraud accusations. Creditors may allege that you only took on the debt because you knew it would be eliminated through bankruptcy. Avoid this by not opening any new credit cards or taking a loan.
If you file bankruptcy soon after obtaining new debt, the creditor may take issue with your bankruptcy at the 341 meeting of creditors. They can challenge your discharge and the allotment of your assets. The creditor may appear and ask you questions about your intent and the use of credit so close to your bankruptcy filing date.
Moving or Transferring Assets
When you file bankruptcy, you will have to list all of your assets, including cash and property. If you move any assets or transfer them into someone else’s name, it may appear that you are hiding assets. You should only sell or transfer property if the proceeds will go towards living expenses or paying current debts.
Some examples of transfers of assets or property that can cause a problem include:
- Changing the name on a car title into someone else’s name, even if that car belongs to your child or spouse
- Changing names on bank accounts
- Eliminating your name from bank accounts on which you are a joint account holder
- Moving large amounts of funds into accounts held by someone else
- Transferring names on real property deeds, even if money is paid for the transaction
Anything that you transfer prior to bankruptcy will be reviewed by the bankruptcy court. If you give away a large amount of money, that transaction will also be scrutinized. You should only sell property or do away with assets if it benefits your living expenses and can be clearly documented.
Repaying Debt Selectively
You may want to repay certain debts that you don’t wish to become part of your bankruptcy. For example, if you owe a personal loan to a friend, you may want to make sure they are repaid before filing bankruptcy. However, this type of preferential payment is not allowed by the bankruptcy court and may result in the court demanding funds back from the creditor.
You can make normal payments to creditors, as you would in the normal course of business. For example, if you normally make a $100 payment to your Mastercard, you can continue to do so. However, any payments that are out of the ordinary or in excessive amounts should be avoided.
Paying off a friend or relative prior to bankruptcy can result in a “claw back” lawsuit. This occurs when the bankruptcy trustee sues the person who was paid to get the money back. When determining what not to do before filing bankruptcy, understand that preferential or fraudulent transfers cannot take place prior to bankruptcy, even if you want to make sure someone is paid what they are owed. They must go through the bankruptcy process and either be discharged or allotted money from your assets.
Avoiding Income Taxes
If you’re worrying about current debts, you may feel like you can’t afford to pay income taxes. However, you must be current on income taxes in order to file bankruptcy, or you may be required to pay the government before your other debts are managed. It’s in your best interest to file taxes, as older tax debts may be dischargeable through filing bankruptcy.
Providing Inaccurate Information
When you file bankruptcy, you must provide a plethora of information. If that information is not accurate or if you’re found to be dishonest, you may face charges of fraud, fines, penalties, and even incarceration. A skilled bankruptcy attorney can review your information and help you provide the most accurate facts about your income, debts, and assets.
At several times throughout the bankruptcy process, you will be asked to swear and oath that you are making truthful statements. If you lie, you can be held accountable in court. If you are unsure of an answer, you should discuss the situation with your attorney. Never lie to the bankruptcy court, trustee, or creditors.
Using Retirement Funds to Live or Pay Debts
You may have worked hard to save money for your retirement. However, when debts pile up and paying bills becomes difficult, you may be tempted to use retirement savings to pay creditors. This is not a good decision. You will likely have tax penalties and take money that you will need later in life. In many cases, a bankruptcy lawyer can help you avoid using retirement accounts to pay back debts.
In most situations, you can keep your retirement accounts through bankruptcy. That includes pensions, 401ks, IRAs, and more. In some circumstances, the amount that can be protected in those accounts is capped. However, you should be able to save some or all of your retirement savings with both Chapter 7 and Chapter 13.
Not Filing Bankruptcy Soon Enough
Most people try to avoid filing bankruptcy for as long as possible. However, digging into your savings and waiting for creditors to take action can have negative outcomes down the road. The longer you wait, the more likely creditors are to file lawsuits, repossess your belongings, and submit foreclosures. When your debt begins to become overwhelming, you should seek the assistance of a bankruptcy attorney who can help you evaluate your situation.
While it’s important to file bankruptcy when you need it, some people rush into bankruptcy too quickly. Bankruptcy is a good method to eliminate debt; however, there is a limit on how often you can do so. You can receive a Chapter 7 discharge once every eight years, or six years after you file for Chapter 13 bankruptcy. You must wait the required waiting periods before you can obtain bankruptcy relief again.
Filing Bankruptcy With the Help of a Skilled Charlotte Bankruptcy Attorney
When you’re facing financial difficulties, you may have many questions about what steps you should take. A Charlotte bankruptcy attorney from the Law Office of Jack G. Lezman can answer all of your questions. Call us today to find out how we can help you.