Top Five Things To Avoid Before Filing Bankruptcy

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If you have plans to file a Chapter 7 or Chapter 13 bankruptcy in the near future, or have already begun the process, you have to begin planning carefully to ensure that the bankruptcy is granted and you’re your financial future will begin on more solid footing once the discharge is complete.  Therefore, there are certain mistakes you should avoid in order to ensure you don’t end up in hot water with the bankruptcy trustee or even have your case dismissed. 

#5 – Stop all use of credit cards

When you know you plan to file bankruptcy and continue to use credit cards (with the intention to avoid paying), that debt could become non-dischargeable.  This is especially true if you purchase items that aren't necessities or luxury items, such as vacations. 

#4—Don’t transfer property

A bankruptcy trustee might ask for details concerning any property transfers made within the past 6 years, particularly focusing on any made within 1 year before filing bankruptcy.  If the trustee finds that the property transfer violates rules relating to the bankruptcy code, that transfer might be voided and the recipient of the property might be forced to return the property to the trustee. 

#3—Avoid repaying money you've borrowed from friends and family

Due to bankruptcy code, any transaction in which you've repaid money that was loaned to you by friends or family could be recovered from the people to which you've paid the money. 

#2—Avoid paying more than $600 to one creditor

In the same sense that money paid to friends and family can be recovered, payments exceeding $600 to any one creditor can also be recovered by the trustee. 

#1—Avoid cashing out on your 401k or retirement plan

Your retirement plan or 401k is protected by the bankruptcy code and if you’ve withdrawn any money from such plans or cashed them in, your trustee will likely void those transactions as preferences.