The actions an individual takes leading up to filing bankruptcy can drastically affect his ability to get a fresh start. By avoiding these mistakes, you can travel successfully through bankruptcy.
- The Credit Card Run-Up Mistake: Don’t use your credit cards once you have made your decision to file bankruptcy. Charges for luxury goods and services owed to a single creditor, totaling to more than $500.00 within 90 days of filing, are presumed nondischargeable and may be found to be due and owing. Cash advances totaling more than $750.00 for all creditors within 70 days of filing are also presumed nondischargeable and may be found due and owing. Don’t Jeopardize your “fresh start” by running up your credit cards.
- The Repay a Family Member Mistake: You cannot treat your family members any better than you would an ordinary creditor with regard to repaying debts. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy.
- The Liquidate Your Retirement Account Mistake: Retirement accounts are generally protected. You can eliminate your debt and usually keep whatever you have in a retirement account free and clear. Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.
- The Transfer Property out of Your Name Mistake: A bankruptcy trustee can undo a transfer of property that previously belonged to you. This can occur if the transfer was made within four years of the filing of the bankruptcy with the intent to hinder, delay or defraud a creditor, or simply if a fair price was not received.
- Equity Loan/Line of Credit to Pay Debt Mistake: Don’t take a loan against your real estate in an effort to reduce your equity. You can often file bankruptcy and not lose your real estate. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk.