5 Common Mistakes
Bankruptcy Clients Make
Bankruptcy is governed by Title 11 of the United
States Codes. Oftentimes, what makes sense in bankruptcy
world does not make sense in everyday life. Here are the top
5 mistakes potential bankruptcy clients make.
1. Selling assets in an attempt to get out of debt
What assets you can keep in bankruptcy is governed
by the specific statutes of each state known as “exemptions.” This sets
forth rules regarding what property you can keep through bankruptcy.
Oftentimes, we see clients liquidate their 401(k), or borrow against
it, or sell their assets. Carefully consider if you can get out of debt
by taking such measures. If at the end of the day, you still cannot get
rid of your debt or get it down to an amount that you can deal with, it
does not make sense to get rid of assets that would otherwise be
protected in bankruptcy.
The best time to consult with a bankruptcy
attorney is when you are struggling to stay afloat and simply do not
see a way to get rid of all of your debts. Remember, filing for
bankruptcy is a tool to shed your legal responsibility to repay the
debt. Nothing in the bankruptcy code prohibits you from voluntarily
repaying the debt after bankruptcy. It’s not about running away from
your debt, but taking a responsible step at facing your financial
situation.
2. Getting rid of assets for less than the fair
market value
Another mistake clients often make is attempting
to hide or get rid of their assets for the fear that they will lose the
asset through bankruptcy. Any transfers of assets prior to bankruptcy
must be disclosed in the bankruptcy petition. Remember, bankruptcy is
for the honest debtor.
3. Repaying an “insider”
It’s a natural instinct to want to pay back family
members, or business associates or other people whom you have a close
connection to before paying back Discover, Chase or American Express.
However, in bankruptcy, this is considered an insider
transfer. It must be disclosed on the bankruptcy petition
and the Trustee can go after the insider for the money if it was repaid
within a certain time prior to filing you’re a bankruptcy petition
4. Incurring more debt in anticipation of
bankruptcy
This can happen in two ways. One by tapping into
lines of credit or other sources of credit you may have (for example,
your home equity line of credit). The debtor may unwittingly convert an
unsecured debt into secured. Remember that when you file bankruptcy,
the duty to repay the debt on a secured debt is discharged, however,
the creditor still has a security interest in the property, and can
exercise its right to foreclose or repossess.
If a client maxes out his or her credit card,
takes cash advances, takes a trip to Paris, with the anticipation of
filing for bankruptcy, the client may be committing fraud. Bankruptcy
fraud is a felony punishable by prison time. Credit card companies
monitor its users for “abuse” and can object in the debtor’s bankruptcy
proceeding. This will almost certainly mean additional attorney fees,
and worse yet, non-discharge of your debt.
5. Not being honest
You are hiring your attorney to be able to spot
potential issues and figure out solutions. The attorney is your ally
and he or she should be treated as such. Maybe you’re simply
embarrassed by something in your financial history, or there is
something you’ve done that you do not want anyone to find out. The only
issue your attorney cannot assist you with is one he or she does not
know about. It’s important that you be upfront and honest with your san francisco bankruptcy
attorney.
Article Source: http://
www.articlesbase.com/bankruptcy-articles/5-common-mistakes-
bankruptcy-clients-make-1693163.html About the Author
About the authors: Jeena Cho and Jeff Curl are San Francisco bankruptcy
attorneys practicing in San Francisco and San Mateo County.
Their practice is focused on chapter 7 and chapter 13 bankruptcies for
individuals, families and small businesses. They can be reached at
(415) 963-4004 | 