Saturday, September 7, 2013

Things NOT to Do Before Bankruptcy

Things NOT to Do Before Bankruptcy

When considering the dos and don'ts before bankruptcy, avoiding actions on the "prohibited" is quite important. Why is this so? Because making poor decisions before bankruptcy may prevent you from getting debt relief.

So, here are some decisions to avoid:
  • Transferring assets out of your name. This raises a huge red flag in bankruptcy court, especially if the transfer occurs right before bankruptcy. Plus, hasty asset transfers may be financially risky or even illegal.
  • Using a credit card for a large cash advance. Some people decide to max out their credit cards before bankruptcy because they fear losing credit later, or because they assume the debt will be swiftly discharged. If someone does this with no intention of paying the money back, it is considered fraud and punishable by law.
  • Paying off a "favorite" creditor. While banks and credit card companies can be seen as faceless entities, it's more difficult when you owe money to someone you know and see regularly. Many people going into bankruptcy try to settle debts with friends or family members as a "favor" to that person. But the court no only frowns on this practice, they may make that person give back the money so other creditors get their fair share.
  • Making large purchases. Even though you may be able to eliminate debt in bankruptcy, buying expensive items outside your price range could put you in hot water.
Don't assume that bankruptcy will spare you from all foolish purchases. Before filing bankruptcy, make sound financial decisions. Rash purchases, financial sleights-of-hand, and sneaky credit tricks will usually come back to haunt you.

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