Transfer Assets Out of Your Name
Some people think they can try to play games and give assets away to relatives or transfer assets to other people. What they may not realize is the potential liability they are creating themselves up to, both criminally and in potentially having their bankruptcy denied.
Part of the bankruptcy process involves due diligence and on your application and in an examination before a trustee you will be asked about your activities. In the trustee meeting, you will be asked if anything was sold, transferred or otherwise disposed of. Activities, even if well intentioned, can create serious headaches, as a skilled bankruptcy lawyer Phoenix AZ relies on can attest.
Wait Too Long
Too often, people will try their best to dig themselves out of a debt problem beyond their ability to resolve. In some instances, this can involve using assets that could be protected in a bankruptcy proceeding to pay off debts that may not resolve their problems. For example, retirement assets are often protectable, so it would not be a good idea to use retirement funds to pay off dischargeable debts.
If protected assets were used, this would result in someone unnecessarily losing protectable assets to fix an unfixable problem that could have been discharged in bankruptcy. It would be well worth their while to at least consult with bankruptcy counsel before making dramatic decisions like that.
Take On New Debts Before Filing
Before filing bankruptcy you may be tempted to have a last hurrah, with the idea that is all going to be discharged anyway. Taking on new debt shortly before a bankruptcy filing could lead to a denial of a bankruptcy discharge as creditors can argue that loans were taken out without any intention of repayment, AKA fraud. As a general rule it would be critical to avoid using credit cards or take on more loans because of the risk of denial.
Pay Off Only Certain Creditors
You may be tempted to pay back a personal debt or a certain account that you have a long history with rather than other creditors. If you selectively pay your creditors, knowing you will be filing bankruptcy, this could have the potential for fraudulent activity and lead to a denial of discharge. It may also mean that payments to preferred creditors will have to be recovered and redistributed. If those preferred creditors happened to be family members it can end up dragging them into the process and filing paperwork or suing for recovery of money.
Thanks to our friends and contributors from Kamper Estrada LLP for their insight into the bankruptcy do’s and don’ts.