As you may know, it is crucial that you act with restraint during your bankruptcy proceedings so you do not accidentally destroy your eligibility or make matters more difficult on yourself than they need to be. However, what you may not know is that the time leading up to when you file for bankruptcy is also a critical time, and your financial behavior during that period will be subject to a significant amount of scrutiny in the bankruptcy court.
With this in mind, here are a few things you should absolutely avoid doing before filing for bankruptcy in Montgomery County, TX:
- Don’t pay back loans from friends and family: Any repayments you make to an “insider” (the technical term the government uses for friends, relatives and colleagues) within the year before you file for bankruptcy will be considered preferential treatment. The trustee assigned to your case will take back those funds and divide them among your creditors. Unfortunately, in the eyes of the law, loans to friends and family are pretty far down the list of priorities for debt repayment.
- Don’t let new bills pile up: The court might be suspicious of a big spending spree or certain kinds of new bills if you let them accumulate before you file for bankruptcy. If, for example, you max out your credit cards or take out a brand-new loan shortly before you decide to file, the court could deem it a fraudulent bankruptcy petition and dismiss it, leaving you in dire financial straits. The court could also just exclude those debts from being discharged. In either case, it’s in your best interest to be honest.
- Don’t talk to your creditors: Once you file for bankruptcy, do not talk directly to your creditors. Let all communications flow through your bankruptcy attorney. Creditors are not allowed to continue communicating with you after you’ve filed your claim, so don’t give them the window they need to do so.
- Don’t transfer assets: Transferring assets to another person to avoid having to list them as part of your estate is a type of fraud, and you can rest assured that your bankruptcy trustee will discover you’ve done this. All transfers or gifts must be included in your bankruptcy paperwork. A failure to be fully honest in this paperwork could result in your bankruptcy claim being denied.
- Don’t sell property for bargain barrel prices: In attempting to sell your assets, the point should be to recover some money to help you pay your bills, not to get rid of assets to make you appear poorer than you are. If you do sell off your property, you must not do so for prices lower than market value.
- Do not withdraw from retirement plans: Never liquidate any of your retirement assets to pay your bills. This is an absolutely massive and potentially devastating mistake made by far too many people filing for bankruptcy in the United States. You will be subject to all the fines and taxes that come with premature withdrawal of these funds, and you will not be able to discharge those taxes and fines in your bankruptcy. Keep in mind that your retirement accounts will typically be fully exempt in the bankruptcy process, so hold on to that money and save it for your future.
For more information about what to do (and what not to do) when filing for bankruptcy in Montgomery County, TX, contact the office of James R. Jones, Attorney at Law.