7 Things NOT to Do Before You File Wilmington Bankruptcy Skip to main content

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7 Things NOT to Do Before You File Wilmington Bankruptcy


Stop don't do that

Stop and think before Wilmington bankruptcy

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If you’re considering bankruptcy, there are some actions to take and some to avoid whether you’re filing Chapter 13 Wilmington bankruptcy or Chapter 7. To find out more about steps to take before, during and after your bankruptcy, seek a consultation as soon as possible with a reputable Wilmington bankruptcy attorney. Here are seven things to avoid before you file bankruptcy.

#1 Don’t Use Your Credit Cards

If you use your credit cards in the weeks and months leading up to bankruptcy, your card issuer can accuse you of fraud by saying you intentionally took on the debt with no intention of paying. Fraud accusations can result from using your cards and running up debt while simultaneously planning to file bankruptcy. Also, you shouldn’t take out cash advances on your cards or purchase luxury items using your cards just before filing bankruptcy, or your bankruptcy discharge can excluded these. 

#2 Don’t Open New Credit Accounts

Opening a new credit account when you’re insolvent is a poor choice for your financial future and can also trigger accusations of fraud in your Wilmington bankruptcy. If you take on debt that you do not have the ability to pay, that is fraudulent activity even if you don’t later file bankruptcy. When you take on debt and sign a finance agreement, you must enter the contract with the good faith intent of honoring the arrangement and paying the debt in full and on time. Avoid this action before bankruptcy.

#3 Don’t Pay Off Any Credit Accounts

Just as taking on new accounts is not recommended before your Wilmington bankruptcy, neither is cherry picking selected accounts to pay off before filing. Choosing one over another is called a preferential payment because you are choosing one creditor as preferential over another when all should be equal. Perhaps you want to pay off a personal loan to a family member – that’s a no-no. Or perhaps you want to pay off one credit card to try and keep it and are hoping that, with a zero balance, you can keep it. You cannot.

#4 Don’t Transfer Assets

Another big “don’t do” when preparing for Wilmington bankruptcy is transferring assets without doing so ethically. For instance, if you have a small boat you don’t need, and you want to sell it at fair market value to pay for your legal and filing fees, that could be acceptable depending on your circumstances. However, if you have a spare car and are worried it won’t be protected in bankruptcy, so you sign it over to your cousin, that would not be acceptable. Peak to your lawyer before taking action like this.

#5 Don’t Let Anyone Put Money in Your Bank Accounts

If you allow a non-spouse to put money into your bank account, perhaps as a favor or because you’re living together and are in a romantic relationship, this is something you want to stop before filing bankruptcy. You don’t want commingled funds to confuse the bankruptcy court when they’re looking at your assets and income. If someone uses your bank account, that needs to end ASAP. Your income and savings should be in an account that is just yours – or yours and your spouse’s if you’re married.

#6 Don’t File a Lawsuit

The proceeds from a lawsuit can become part of your Wilmington bankruptcy case if it’s filed before or during your bankruptcy case. If you have a potential claim but haven’t filed it, discuss the legal issue with your attorney before filing bankruptcy. In case of divorce, it’s often better to sort out your debt together and then file your divorce suit. With a civil suit for damages, complicating your bankruptcy with a lawsuit may be needless. However, hiding a lawsuit is a basis for fraud, so consult your lawyer.

#7 Don’t Panic

Many people get stressed out before they file Wilmington bankruptcy because they’re not sure what to expect and haven’t been through the process before now. The unknown can be intimidating, and many people view bankruptcy as an option of last resort and an end. It’s not an end, but a fresh start that comes out of bankruptcy because used wisely, you can come out of bankruptcy with a clean financial slate and a better chance at a brighter future.

To find out more, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.

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