If you’ve found yourself in a very difficult situation due to high medical bills, loss of income or perhaps a divorce, and you’ve come to a decision that for filing bankruptcy is your best option, you need to be very careful with your actions prior to officially filing for one. Talk to any bankruptcy attorney in Baltimore, Maryland and you will be given some list of moves that may be detrimental to your bankruptcy case. It is important to avoid these mistakes so that the entire process will go smoothly.
Using Your Credit Cards
The use of credit cards has to stop immediately. Using a credit card without the intention of paying is fraud, and the bankruptcy code gives credit card companies legal advantages when credit is used before filing for bankruptcy – you can be charged with a crime! You can however, continue using a debit card connected to your bank account wen paying for essential purchases such as food, gas or housing.
One common misconception is that when one transfers assets such as a house, car or cash to relatives and other significant others that those assets will be protected. This is simply not the case, and worse, the bankruptcy court can actually charge you with fraud. This is true even if you unknowingly transferred assets without the intention of concealing them. Keep in mind that having assets doesn’t disqualify you from filing bankruptcy nor does it mean you will lose them. Your bankruptcy lawyer in Baltimore, Maryland can help you best deal with these assets.
Some of the transfers that can get you in trouble are:
- Changing names or eliminating your name from joint accounts.
- Eliminating your name as an owner of a business venture.
- Transferring your spouse’s or child’s assets named to you into their names.
- Depositing or moving funds into other bank accounts.
- Deeding real property in your name to another person, even if the transaction is legitimate and the real value is paid.
Paying Off Certain Creditors
Many people want to pay as much certain creditors in full before filing for bankruptcy just because they think it’s “the right thing to do.” But this can actually backfire as the bankruptcy court representative, called bankruptcy trustee, can sue those creditors just to retrieve the money back (claw back lawsuit). Even if those creditors are family and friends, paying off your debt should be avoided as this may be considered preferential transfer – a creditor received payment in preference over other creditors of the same weight. This may delay not only your case but your possible discharge, as well.
Touching Retirement Funds
Retirement plans are almost always protected from liquidation by bankruptcy laws, so cashing out retirement plans or 401ks should be avoided. Once the money has been moved, it becomes more difficult to protect it and you might even lose it altogether.
Doing Unusual Deposits into Your Bank Account
You should only deposit money into your account if it’s from sources of income. Never deposit anything else such as a friend’s check or any money that is not yours, even cash or check from relatives and friends who are trying to help you with your financial problem. Those who own a business should also refrain from conducting business transactions through their personal accounts.
Once you file for bankruptcy, your assets, including current and future payments awarded to you from a lawsuit, can be taken by the bankruptcy court even if the case is still unresolved or the amount you are entitled to is not yet determined. However, in some states, there are state exemptions on how much of the settlement or any award will be taken away from you. In others, there is simply no exemption.
Taking Too Long to File
One of the most common mistakes is simply waiting too long to file. Of course, bankruptcy is not a very easy process, it takes a lot of thinking and planning before making a final decision but delaying the filing will only make you more susceptible to committing more mistakes and accumulating more problems. If you are facing a major financial crisis and you think that filing for bankruptcy is your best option, talk with a bankruptcy attorney in Baltimore, Maryland so that you will know if you are indeed taking the right step.