Filing for personal bankruptcy is a difficult decision for most people. But once you do decide to file, avoid these bankruptcy mistakes if you want to get a fresh start. To get the maximum benefit from your bankruptcy, never do the following prior to filing:
Personal Bankruptcy Mistake #1: Do not treat relatives or business associates who may have loaned you money differently than your other creditors by paying them more than $600 during the year prior to the start of your bankruptcy. If you do the trustee in your bankruptcy is likely to view the payment as “preferential.” Should that happen and you’ve filed Chapter 7, the trustee may take back the money and distribute it among your creditors; if you filed Chapter 13, the amount you must pay each month on your reorganization plan may be increased to cover the amount of the preferential payment you made.
Personal Bankruptcy Mistake #2: Do not pay an unsecured, non-priority creditor, like a credit card company, more than $600 during the 90 days prior to the start of your bankruptcy. That payment may also be viewed as preferential.
Personal Bankruptcy Mistake #3: Don’t run up your credit cards or get a loan during the 90 days prior to filing. If you do, you run the risk that those debts will not be discharged through bankruptcy and it’s even possible that the court will view your actions as fraudulent and dismiss your bankruptcy.
Personal Bankruptcy Mistake #4: Don’t try to protect your assets by transferring title to someone else or by giving them away. The trustee is entitled to undo what you did, take the asset and sell them to repay your creditors. Even worse, your bankruptcy could be dismissed. This advice applies to the year preceding the start of your bankruptcy.
Personal Bankruptcy Mistake #5: Don’t forget to take the mandatory financial education course needed to complete your bankruptcy. Most people who file for bankruptcy will tell you that this class (offered online) is largely a waste of time and money. After all, many people file for personal bankruptcy because of major life events like large medical bills, unemployment or divorce and no amount of financial education can solve all those problems. Nevertheless, you will have to take this course or you may not be able to get your discharge. Ask your attorney for details.