The decision to file for bankruptcy can be a difficult one, but once you decide to move forward, it is important to understand what you shouldn’t do before you actually file. Filing for bankruptcy is not a guarantee that you will be approved. Therefore, you need to follow the right steps to increase your chances of a successful case.
Don’t Use Credit Cards
It can be tempting to continue using your credit cards, especially if you are having difficulty paying all your bills. However, your bankruptcy attorney and the courts will evaluate your credit card situation and determine if you have been making charges without the intent to pay them back. Some of the activities they will look for include:
- Buying luxury items costing more than $600 within 90 days of filing
- Taking out more than $875 in cash advances within 70 days of filing
- Making any purchases within 70 to 90 days of filing
Fail to File Taxes
Failure to file your tax returns while you are in the midst of a bankruptcy or preparing to file can lead to a dismissal of your claim. Bankruptcy courts use your tax returns to determine your income levels and whether you are able to pay for the debts. If these returns are unavailable, you cannot be approved for either a chapter 7 or a chapter 13 bankruptcy.
Ignore Any Pending Actions
No one likes to be constantly contacted by creditors or collections agencies, especially when they have no ability to pay back the debt. However, you can’t simply ignore the actions your creditors are attempting to make. If they are in the process of garnishing your wages or taking other similar actions against you, it may become too late to do anything about it, even when you file for bankruptcy. Let your creditors know you are filing for bankruptcy and ask them to contact your lawyer with any questions or concerns.
Change Your Assets
Your assets play a critical role in filing for and being approved for bankruptcy. For this reason, you need to avoid making any major changes to your assets for a period of time before filing. The bankruptcy trustees will typically look back over the last years in New York. Some of the changes you should avoid include:
- Selling property
- Transferring assets into someone else’s name
- Hiding any assets
Not all changes to assets are your fault, but these can affect your ability to file for bankruptcy as well. These changes include:
- Receiving a large inheritance
- Filing for a large tax refund
- Being awarded a large settlement in a court case
If these changes affect your ability to pay the debt you have accrued, you may be denied in your filing.
Selective Repayment Practices
When you file for bankruptcy, you may have the means to pay some of your debts. As you determine which ones you will pay, you need to keep selective repayment in mind. What this means is if you choose to pay on some of your loans, whether to a creditor or a friend or family member, the court may sue for this money and then evenly distribute it among all your debts. While it may seem inconsequential which debts you choose to pay, the court views the situation in a different light. Based on their regulations, all creditors must be treated equally.
If you feel you may need to file for bankruptcy sometime in the near future, it is important to know what you should avoid to ensure your case goes as smoothly as possible. In addition to avoiding these situations, you will need help handling your case. When you are ready proceed, contact our office for help.