So you have decided to file bankruptcy. Now that you have found a knowledgeable bankruptcy attorney and discussed your situation, there are a number of things you should consider. Among the documents you have to retrieve and the fees you have to pay, there are also things you should stop doing before you file.
Below is a guide that will help you get through your bankruptcy case:
1) Stop Getting into More Debt
It is understandable that many people who need to file bankruptcy, also need to continue to use creditors to pay for everyday expenses. However, if you decide to file, you should stop paying for your credit cards, which will help you stop using credit cards. At this point you must live off of the income you earn. If you continue to use the credit cards before filing, it can get you into a lot of trouble, and that debt might not be wiped out in bankruptcy.
2) Stop Paying Your Creditors
As stated above, you should stop paying your creditors. The issue arises, when one creditor might complain that you are paying another creditor while not paying them. This can cause issues in your bankruptcy process. Moreover, you should stop withdrawing money from your 401k plan or retirement account to pay your creditors. That money is protected in bankruptcy. If you withdraw it and spend it on creditors, it is unlikely that the funds can be recovered. More importantly, if you deposited the money into your regular checking or savings account, your attorney will have a tougher time protecting the money from the bankruptcy trustee and court.
3) Stop Paying Friends and Family Members
You must not pay back relatives or friends when you decide to file for bankruptcy. The amount you pay them is listed on the bankruptcy petition. In this situation, the Trustee might argue that these are “inside creditors,” and that you gave them preferential treatment. The argument is, why are you paying your friends and relatives but not paying your credit card debts.
4) Stop Working the Temp Job or Receiving Extra Income
If you are working a second job or receiving money from friends and family members, the money you receive can be considered income. The court takes an average of all income you receive in the six months prior to filing your bankruptcy case. If you have 2 or 3 “good” months, this can change the complexion of your case. Having a higher monthly average income may cause you to fail to qualify for Chapter 7, or make higher payments in a Chapter 13.
5) Stop Selling Your Property and Belongings
There is nothing wrong with selling your property. The problems arise if you sell them for less than fair market value. The bankruptcy trustee and court might consider this fraud. For example, do not sell or give your car to a relative or child for little to nothing. The argument is that you are giving away property that could’ve been sold for higher value and used to pay off some of your debt.