If you are planning on filing for bankruptcy under Chapter 7 laws, there are some things that you shouldn't do to help your filing go through smoothly. Some of these things could be done accidentally, and may cause a creditor to challenge your bankruptcy. Be sure not to make these 3 mistakes.
Transferring Property or Money
A common mistake is thinking that transferring assets to someone else's name will help protect those assets during a bankruptcy filing. Not only is this a form of fraud, but it will be discovered by the courts. It does not matter if the transfer was done intentionally or accidentally.
For example, you may have a spouse or child that drives a car that is actually in your own name. You cannot change the title of the car to the person that actually drives the car. If you have a joint bank account, you cannot take your name off of it. If you own a business, you cannot put the business in another person's name. Even the sale of a home is not permitted if the buyer pays the actual value of the house.
These actions are sometimes done to protect assets because you fear losing them. Just because you file for bankruptcy does not automatically mean that you'll lose your assets.
Paying Off Creditors
You may be tempted to pay specific creditors before you file for bankruptcy. Usually it's because you want to ensure a specific person receives their money promptly, and bankruptcy can delay the process of them receiving it. This is actually prohibited when filing for bankruptcy.
Normal expenses and bills are allowed. For example, if you normally spend $500 on your credit card and pay the bill immediately, you can continue to do so. The courts will look for anything abnormal, especially if a creditor is paid off in full. Doing so could be considered a preferential transfer, and lead to a clawback lawsuit where your paid off creditor is sued for the money you paid to them.
Making Unusual Bank Account Deposits
All money going into your personal bank account should be from your regular paychecks. This can be an issue if you own a small business, and are used to depositing checks into your personal bank account and transferring funds to the business account later.
These are just a few of the mistakes that you can make prior to filing for Chapter 7 bankruptcy. To ensure that you are doing everything correctly, work with an attorney like John G Rhyne Attorney At Law for additional guidance.
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