TOP MISTAKES PEOPLE MAKE BEFORE FILING BANKRUPTCY
1. Moving Your Money Into Someone Else’s Bank Account.
This may seem like a wise choice because it gives the impression that the money isn’t really yours and won’t be handled. In actuality, bank statements or other documentation demonstrating where a person’s money is going is always requested by bankruptcy courts. The trustee will immediately notice if someone is making money but depositing it into someone else’s account.
- Putting money into another person’s bank account frequently qualifies as a fraudulent transfer. Even if the beneficiary of the funds has already spent them, the court may nevertheless order them to contribute to the bankruptcy. If it is a joint account, this is less likely to happen. This may seem like a wise choice because it gives the impression that the money isn’t really yours and won’t be handled. In actuality, bank statements or other documentation demonstrating where a person’s money is going is always requested by bankruptcy courts. The trustee will immediately notice if someone is making money but depositing it into someone else’s account.
- What should you do if your money has been entering the bank account of another person? Consult a lawyer first for situation-specific legal advice. Your attorney will likely advise you to obtain a prepaid debit card. Although there are some fees associated with them, you can have your paycheck instantly transferred onto the card and use it to make purchases. For paying bills, they have a routing number and account number exactly like a bank account. Debt collection attorneys still haven’t discovered a way to freeze funds kept on one of these prepaid debit cards.
2. Transferring Motor Vehicles and Land into Relatives and Friends Names.
This also looks like a smart move before to bankruptcy. You wouldn’t put it at danger in bankruptcy if it wasn’t yours, right? Wrong. If you transfer a car to a friend or sell it to a friend for $1, it is the same as depositing money into someone else’s bank account. Any time you swap something of value for less than it is worth, or you merely give it away, it is a fraudulent transfer. These kinds of transfers might be found through numerous public records searches. Debt collection attorneys still haven’t discovered a way to freeze funds kept on one of these prepaid debit cards
- As long as you keep them in your name, the majority of valuable items that a person needs to get by in life are protected in bankruptcy. Even if something had the potential to be protected before to the transfer, it is no longer protected once it is transferred out of your name. Attorneys, like this one, provide a free initial consultation and can advise you on what to do with your assets, if anything, to ensure that you protect as much as you can in the case.
- The most common things transferred before filing includes motor vehicles and rental property.
3. Paying Credit Card and Hospital Payments and Other Bills Longer Than Necessary
Many people keep paying their credit cards and other dischargeable loans up until the point where they submit the case. Throwing good money after bad is what this is. When the case is filed, all debts, regardless of amount, are discharged. After a bankruptcy attorney has examined your circumstances to see whether bankruptcy would be a good option for you, you can typically save $1,000 or more per month by discontinuing the debt payments.
- How does credit score fare? It’s true that your payment history will slightly increase your credit score, but after a year or two, the benefit will be minimal. The bankruptcy filing itself will have the most influence on whatever loan you obtain in the year following bankruptcy, and an improved payment history will have little to no impact.
- I see that, in general, people are more anxious about their credit score than they are with the amount of money in their checking accounts. The primary purpose of bankruptcy is to get rid of your debt and keep your assets so that you may start to have a positive net worth again. However, for around two years, your credit score will drop.
4. Transferring Balances and Consolidating Loans
Making a succession of balance transfers, in which you transfer the debt from one loan or credit card to another loan or credit card, is a mistake comparable to this one. People frequently transfer balances from one account to another since they are used to paying bills every month and don’t want anything to arrive late. By doing this, you can occasionally postpone payments for a month while still benefiting from cheap promotional interest rates.
- Why is this error? The discharge of NEW obligations in bankruptcy may be challenged by creditors. Taking out a new loan to settle an old debt is known as a balance transfer or consolidation loan. The new debt may decide to attempt to include something in the bankruptcy in order to keep their debt alive. Your hazards are significantly reduced if you just let things continue as they are.
- In general, it’s preferable to refrain from taking out new loans or borrowing money to pay off previous ones just before declaring bankruptcy.