People find themselves in the middle of a tough financial situation for a number of reasons, such as loss of income, excess medical bills because of health problems, or divorce. Whatever the case may be, you might have a mountain of debt piling up and not enough money to pay what you owe to your creditors. You may end up coming to the conclusion that bankruptcy is your only solution. If this is the case, there are some steps that you must avoid making to ensure that you don't find yourself in deeper water.
Transferring Money or Property
It is a common belief that you can transfer assets to other individuals to keep them safe during the bankruptcy process. However, this will not protect any of your assets. In fact, any attempt to protect your assets in this particular manner could be seen as fraudulent activity by the court. Also, it is important to keep in mind that you may not lose all of your assets just because you filed for bankruptcy.
Paying Off Specific Creditors
It is often believed that you should try to pay off whatever debts you can before filing for bankruptcy because it will increase your chances of a successful case. However, it may actually damage your overall case, as making a payment to a specific creditor is known as a preferential transfer. This means that you are making payments to one creditor over another, although they all hold the same weight. In some cases, a lawsuit may be filed to obtain that money that you paid back to ensure the money is all distributed fairly and equally, delaying your bankruptcy filing.
Utilizing Your Credit Cards
If you are in financial trouble and plan to file for bankruptcy, you should stop the use of any credit cards immediately. Therefore, you should not use your credit cards to buy any luxuries or go on a shopping spree of any kind. You also should not take on a cash advance on any of your cards. In some cases, this can be seen as a fraudulent activity by the court if you do.
The aforementioned are just a few of the things you should avoid when preparing to file for bankruptcy. If you would like to learn more about what you can and cannot do as you prepare to file for bankruptcy, contact a bankruptcy attorney in your area.