5 Things to Avoid Before Filing for Bankruptcy - John T. Orcutt – North Carolina Bankruptcy Attorney and Enforcing Bankruptcy Laws Skip to main content

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5 Things to Avoid Before Filing for Bankruptcy


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When you take a serious look at your financial situation and feel like bankruptcy is probably in your near future, there are a number of things you need to do to get ready for filing: Searching out and hiring a good bankruptcy attorney, getting all your financial records together, creating a very detailed picture of your monthly expenses and so on. But there are also a lot of things you must not do in the months before filing because they could put some serious bumps in the road to your fresh start. Here are the top five things not to do before filing for bankruptcy:

1. Careless Spending: Sometimes people will suddenly run up balances on their credit cards before declaring bankruptcy. After all, what does it matter when you’re about to file? It actually matters a lot. If you do that, you could be accused of fraud for accumulating additional debt that you really had no intention of paying. It could land you in jail, so be forewarned!

2. Transferring Assets. In a bankruptcy case, the bankruptcy trustee is trying to see if you have any non-exempt assets that could be sold off to pay creditors. More than likely your house and car will be protected. But if you have other things like a boat or motorcycle or anything else that has some real value beyond the amount that’s exempted from bankruptcy, you might be tempted to transfer it to a friend or relative to hold onto it while you go through the bankruptcy process. Just remember this: You sign your bankruptcy petition, which includes a full listing of all your assets, under penalty of perjury. If you are found guilty of trying to hide or move assets around to keep them out of bankruptcy, you could wind up with a $500,000 fine and/or up to five years in prison. Obviously, taking this kind of risk is not worth it!

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3. Cashing Out Your Retirement. Don’t put your future retirement in jeopardy by drawing it down to pay off unsecured debts like credit cards. If you’re contemplating doing that, you’re probably on the verge of declaring bankruptcy, where most or all of that unsecured debt will be completely discharged. Sacrificing your retirement to pay down those debts is like flushing that money down the toilet. Those funds are nearly always protected during bankruptcy.

4. Paying off Unsecured Debt. Remember, these are the debts that are most likely to be discharged in a bankruptcy, so continuing to put money towards them (like credit card bills) just doesn’t make sense. What you need to do is prioritize payments on the things that can’t be discharged – child support or alimony, federal income taxes, and student loans for example. If you own a home and want to stay in it, you need to keep making mortgage payments even during bankruptcy or the lender will foreclose on you. The same goes for your car. Keep paying for the things you want to keep, but let the unsecured debtsbe your lowest priority, if you're approaching bankruptcy.

5. Ignoring the Situation. If your financial situation has deteriorated to the point where bankruptcy may be an option, it is better to file for it now than to do nothing. After all, the problems are not going to go away, and dealing with it now is better than dealing with it later.

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If you long for a financial fresh start, bankruptcy is one way to get there. But you need to be careful not do the things listed above. As long as you avoid those, you will be on your way to the new beginning you’re looking for. If you’re facing financial hardship and need help, contact a qualified local bankruptcy attorney today.

Dedicated to helping residents of North Carolina find the best solutions to their debt problems. Don’t waste another day worrying about your debt. Call +1-919-646-2654 today to schedule a free initial consultation to discuss your bankruptcy options.

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