Financial hardship can hit anyone, and like most mishaps, it strikes at the worst time. You get laid off after you buy a new house. You become too disabled to work, and the credit card bills start piling up. There are other ways that debt can overwhelm you, but it doesn’t have to ruin your financial future or your health. You can start over by filing bankruptcy in New York.
When you file for personal bankruptcy, you benefit from an automatic stay. Creditor and debt collector calls stop. So do wage garnishments and collection lawsuits. You get some breathing room and the chance to not only rebuild, but do better than ever.
Bankruptcy can provide you with a fresh start- provided you don’t sour the opportunity by making serious mistakes. Below are five of the most common missteps made by those who plan to file, and why you should avoid them.
This is arguably the most prosecuted bankruptcy offense. People transfer nonexempt assets or fail to disclose them so they can’t be seized and sold to satisfy creditors. If losing property is a major concern, consider filing Chapter 13, which allows you to keep more assets by entering into a debt repayment agreement with your creditors. Being deceptive can result in significant fines and even incarceration.
Racking Up New Debt
If you accumulate new debt prior to filing for bankruptcy, the creditors may argue that you committed fraud because you acquired the debt without any intention of repaying it. At best, they may object to your discharge. At worst, you could be prosecuted for bankruptcy fraud.
Some things to keep in mind:
- If you take out a cash advance of up to $875 within 70 days before filing, that debt may not be discharged unless it was a payday loan and you were on a cycle of taking out advances and repaying them.
- If you buy a luxury item worth $600 or more on your credit card within 90 days before filing, the creditor can object to your discharge.
To summarize: if you know you’re going to go bankrupt, resist the urge to have one last spree at your creditors’ expense.
Paying Family Members First
According to the U.S. Bankruptcy Code, payments of over $600 to family members (insiders) within one year prior to filing for bankruptcy are considered preferential payments. To put it more simply, you are not allowed to ‘prefer’ one creditor over another, and your trustee can take steps to reclaim that money and distribute it to creditors pro rata. It’s embarrassing, and not allowed. Don’t do it.
Getting Money Out of a 401K To Repay Creditors
Retirement accounts are usually protected in bankruptcy proceedings, but not everyone knows this. Consequently, many people drain these accounts to pay down debt and incur a tax liability in the process, which is usually nondischargeable. Protect your future and leave your retirement funds in place.
Transferring Property For Less Than Its Value
If you transfer property prior to filing for bankruptcy and received less than fair market value, such a move can be construed as bankruptcy fraud. Your trustee can undo any transfer that is clearly not a fair and honest exchange, so it’s really not worth the trouble.
At the Levoritz Law Group, attorney Miechia Gulley will help you obtain debt relief, stop creditor collection efforts, and get the financial fresh start you need. For more information about the bankruptcy process or to schedule a confidential consultation, contact us today.