Do's and Don'ts of Bankruptcy
Understanding what to expect during the bankruptcy process.
When people are faced with unmanageable debts and mounting financial pressures, they may do things that will seem like reasonable steps to take, but that will actually be detrimental to them if they file a bankruptcy case.
If you are even exploring the possibility of filing a bankruptcy case, please read the following carefully and always consult with a bankruptcy attorney early on.
You Should Always:
- Keep and maintain good financial records.
You should retain any financial documents that your attorney will need to process your bankruptcy petition. This would include payroll check stubs, bank statements, mortgage records and tax returns. You should also save monthly statements for all debts and any collection letters you may be receiving. Begin keeping receipts for auto expenses, food expenses and medical costs. If you have been sued by a creditor, retain any legal documents you have received. - Keep up to date with payments for your house and vehicles (if you wish to keep them).
Secured creditors may repossess or foreclose without notice before a bankruptcy case is filed. Even after a bankruptcy filing, it is your responsibility to keep such payments current, even if the creditor suspends sending you monthly statements. - Take your bankruptcy case seriously.
Filing a bankruptcy case may be the best solution to your financial situation, but you must respect the interests of your creditors and the bankruptcy court. Any attempt to conceal assets, conceal liabilities, defraud a creditor or act dishonestly may result in serious sanctions. - Be completely open and honest with your attorney.
You must be forthcoming with your attorney, even if it may be awkward or embarrassing to disclose certain information. Your attorney is on your side, and the information he or she asks for will be needed to successfully file your bankruptcy case. - Make yourself easily available to your attorney.
As your bankruptcy case proceeds from initial meeting to discharge, your attorney will often have the need to contact you about issues and questions that have come up in your case. If you change telephone numbers (including cell numbers), addresses or e-mail addresses, let us know immediately.
Bankruptcy Problem Areas to Avoid
- Failure to disclose all of your assets and all of your liabilities.
Incomplete disclosure of your assets and liabilities may cause you discharge to be denied or revoked. Clients are sometime reluctant to list a favored credit card, debts to family members or an asset. There are no exceptions-- all debts and all assets must be disclosed on the bankruptcy petition. Full disclosure protects you from allegations of fraudulent conduct and lets you sleep peacefully at night. - Repayment of debts to relatives or close friends.
The bankruptcy laws require fair treatment to all unsecured creditors. This means that payments to creditors you like (friends and relatives) can not be give special treatment over other creditors.
Sale or transfer of assets for less than fair market value before filing:
If you sell or give away any assets before filing your bankruptcy case for less than true market value, the court will get it back and sell it to pay your creditors. You must also disclose any sale or transfer. Before you sell or give away anything of value, consult your attorney.
- Some debts cannot be discharged in a bankruptcy.
For example, most student loans cannot be eliminated by filing bankruptcy. Child support and alimony obligations will continue to be your responsibility. The new bankruptcy laws have added to the types of debts that may survive a bankruptcy discharge, and may impact upon your decision to file.
- Do not increase your debts immediately prior to filing.
You are under an obligation to treat your creditors fairly. It is fraudulent to run up debts when you have the intention to eliminate them in a bankruptcy. Also, it doesn't work. Recent charges for cash advances and goods will not be eliminated.