When you file for bankruptcy there are some things that you may want to consider avoiding before and after filing which can have a significant affect on the outcome of your case. Avoiding bankruptcy mistakes can make your bankruptcy case go smoother and cause fewer problems in obtaining a discharge. Whether you file for Chapter 7, Chapter 11, or Chapter 13, knowing what mistakes to avoid is key to successful debt relief. In a Bankruptcy case, even small mistakes can become very costly. Even inadvertent mistakes can jeopardize your chance of discharging certain debts and keeping your exempt property.
If you are considering filing for bankruptcy relief and would like to know more about what bankruptcy mistakes to avoid, Contact the Houston Bankruptcy Lawyers at The Law Offices of R.J.Atkinson for a free bankruptcy evaluation. We have helped thousands obtain debt relief through bankruptcy and we may be able to help you.
The following are some of the mistakes to avoid when filing for bankruptcy:
- 1. Refusing to Consider Bankruptcy as a Debt Relief Option.
There are a lot of people experiencing debt problems that never consider bankruptcy as a debt relief option. When the are involved in a divorce, facing a foreclosure, a repossession, or simply have overwhelming credit card debt, they refuse to consider bankruptcy as a debt relief option. If you’re like the majority of people, the word bankruptcy doesn’t always sound so positive. In fact, many people consider the prospect of filing for bankruptcy to be an extremely bad thing to do. It’s not until those people are facing a life changing financial problem, or the potential loss of their home do they consider bankruptcy. You should be aware that many famous people have filed for bankruptcy to deal with their debt problems. Bankruptcy provides a chance for an honest debtor to start over financially. Whether bankruptcy is used to get rid of debt, reorganize debt, or reduce debt, it is a debt relief option that puts you in back control.
Even when faced with loosing everything, some people still refuse to consider bankruptcy because of the negative connotations in the media spread by credit card companies, mortgage lenders, and other financial lobbies. Don’t let the misinformation deprive you from obtaining debt relief and a fresh financial start. If you need debt relief Contact the Houston Bankruptcy Lawyers at The Law Offices of R.J.Atkinson for a free initial consultation.
- 2. Delay and Procrastination.
Once overwhelming debt begins, or a significant debt related event such as a foreclosure, repossession, or wage garnishment is in process, its time to do something, and do it quick. Get the facts, and get them from an experienced Bankruptcy Attorney. Its human nature to not always deal head on with negative events, however in many debt related situations, if you don’t act timely you can loose your home, your car, your wages, and your peace of mind.
It’s understandable that most people who end up facing debt problems have never had to deal with lawsuits, foreclosures, wage garnishments, or creditor harassment before so they aren’t familiar with their options on how to proceed. Knowing When To Consult A Bankruptcy Lawyer is important in understanding all of your debt relief options. As in many things in life, people will delay taking action until the last moment only to find it’s too late and many of their options are lost. Ignoring debt problems won’t make them go away.
If you’re in debt and need relief, take steps early on to get the process started. Whether its procrastination, or the inability to face the possibility of loosing their home, car, or other assets, many people will wait to the last possible moment to consider filing for bankruptcy.
- 3. Using a Home Equity Loan to “get out of debt”
If you have debt that is no longer manageable, then bankruptcy could be an option. While there are Bankruptcy Alternatives which can be utilized to deal with debt, using a home equity loan to pay off credit cards or get out of debt as opposed to filing for bankruptcy may not be the best thing you can do. Borrowing from a secured creditor to pay an unsecured creditor is not a good idea. Borrowing your way out of debt doesn’t always work out. In fact, there are many people who get a home equity loan to pay off their credit cards but end up losing their home because they can’t afford to make the payments on the home equity loan.
Home Equity Loans shouldn’t be used to pay off huge credit card balances. When you get a home equity loan to payoff credit card debt, you essentially make unsecured debt secured. When your credit cards don’t get paid, the credit card company will call and harass you to pay. Even if they sue you still have your home. If you don’t pay the payments on your home equity loan, you can lose your home. Don’t get a home equity loan to pay off debt until you get a free initial consultation from a Bankruptcy Attorney.
- 4. Using your Retirement Account to Pay Off Debt.
Using a 401(k), IRA, or other qualified tax deferred retirement account to pay off debt isn’t usually a good option to address debt. Taking out a loan from a retirement plan or cashing in an IRA or 401(k) as opposed to filing for bankruptcy can actually cost you much more in the short term and long term. First of all bankruptcy protects IRAs, 401(k)s, and similar qualified retirement accounts. When you cash them out or withdraw cash you are creating an I.R.S. tax liability. So not only are you taking away from your future retirement, you are creating more debt with the I.R.S.
Retirement accounts aren’t tax free, they are tax deferred which is just as it sounds, deferred. You don’t pay tax until you take it out. Hopefully the tax will be deferred until you retire. If you take an early withdrawal you will most likely have an early withdrawal penalty. So when you add the early withdrawal penalty to the I.R.S. tax liability to pay off debt, it can equate to costing you much more than addressing your debt in a bankruptcy. This isn’t to say that every situation falls into this category but for most people taking away from their future and incurring tax liability to pay off interest on credit card debt isn’t always the best way to deal with debt problems. Before dipping into your retirement, get the facts on how bankruptcy can help you. Once the money is taken out of your retirement account, there is no longer any protected from your creditors, and you'll likely owe penalties and taxes on any retirement accounts that were cashed in.
- 5. Failing To List All Of Your Creditors.
When you file for bankruptcy, you are required to list all of your debts. It only makes sense that if you don’t list a creditor, then the debt owed to that creditor might not be discharged in your bankruptcy. How will the creditor know you filed for bankruptcy? It is necessary to list all of your creditors, even if you intend to repay the debt. In fact, bankruptcy law requires you to include all of your debts on your bankruptcy petition, even if you want to keep the debt. Even if you have a co-maker or are a co-signer on a debt you are reaffirming, they should be listed. Although it may be possible to re-open your bankruptcy case to amend your schedules if you forget to list a creditor, it’s not always possible, so it’s definitely best to list them all upfront.
- 6. Purchases Prior to Filing For Bankruptcy.
Credit Card transactions or any transactions for that matter occurring in the 6 months prior to filing as well as certain balance transfers, cash advances, or major purchases up to 24 months before filing could be subject to scrutiny by the trustee. What they are looking for are those who charge up credit cards or incur substantial amount of debt, and make little or no payments and attempt to discharge the debt s in bankruptcy. Any transactions in the six months before filing are definitely looked at with great detail as are the charges 90 days preceding filing. Don’t make the mistake of not listing transactions as the consequences of doing so can draw charges of fraud. In situations where you made large balance transfers or in other words borrowing from one credit card to pay another, you may encounter problems if the creditor objects to discharge in that they might claim you were insolvent at the time the debt was incurred so you never had any intention of paying the debt. If you do have cash advances, balance transfers, or major purchases before filing, make sure you discuss them with your attorney before filing a bankruptcy.
- 7. Transferring Assets Before Filing Bankruptcy
Many people who consider filing for bankruptcy are under the wrong impression that they can sell assets or transfer assets to a family member or friend just before filing. They may be afraid that they won’t be able to keep their property so they may get rid of their assets to avoid them being taken. This is not what to do when filing for bankruptcy. In Texas, most people are able to keep their assets due to the generous exemptions provided to Texas Debtors. Transferring assets before filing bankruptcy can be construed as fraudulent and those transfers can be reversed or recovered by a trustee if deemed to be fraudulent. Transfers of any kind 2 years prior to bankruptcy can be red flags to a bankruptcy trustee and can make your debts non-dischargeable if a fraudulent transfer has occurred. Being honest and forthright in a bankruptcy proceeding is the benchmark for debtor’s seeking the protection under the Bankruptcy Code. Being dishonest can draw criminal charges and cause more problems than you may already have. If you have transferred assets in the usual course of business or as a normal transaction, disclose it. Don’t make the mistake of transferring assets before filing for bankruptcy.
- 8. Concealing Assets When Filing for Bankruptcy
Just like transferring assets before filing bankruptcy, concealing assets can get you charged with a federal crime. Concealing assets is just as bad as fraudulently transferring them. Since most people in Texas who file for bankruptcy are able to keep all of their assets due to the generous Texas State exemptions, concealing your assets isn’t worth the risk of jail time. The US Trustee probably isn’t going to charge you with bankruptcy fraud for failure to list your family pet as an asset, but you should be aware that you sign your bankruptcy schedules listing your assets under penalty of perjury so be thorough . Don’t leave off anything. Being dishonest by concealing assets can draw criminal charges and cause many more problems than you may already have. If you have forgotten to list certain assets, disclose them as soon as possible. Make sure you and your attorney go over the schedules in detail so you don’t make the mistake of concealing assets before filing for bankruptcy.
- 9. Paying Back Family Members, Business Associates, or Friends Before Filing Bankruptcy
When you decide to file for bankruptcy, you have to list all payments to creditors in the 90 days prior to filing. And, all payments in the year prior to filing to insiders such as family members, business partners, or for the benefit of relatives, business associates, or family members. These “insider” payments or payments for the benefit of those closest to you are looked at with scrutiny because “preferences” are not permitted in bankruptcy. You can’t decide to pay certain creditors and not others; especially when they are related to you or you received some direct or indirect benefit from making such preferential payments. A bankruptcy trustee has the power to reverse such preferences. A trustee can demand that a creditor who received a preference payment must return it to the bankruptcy estate. If the creditor fails to do so the trustee can file a lawsuit to get the money back. When a trustee can’t get the preference payment(s) back, they can possibly object to your discharge. If the trustee objects to your discharge, you have to repay the preference(s). This means that if you make any preferential payments and they can’t be recovered by the trustee who decides to recover them you will pay the debt 2wice. The bottom line is that you shouldn’t make payments to family members, friends, business associates or anyone prior to filing bankruptcy or you could pay 2wice; or worse yet you could be denied a discharge.
- 10. Filing for Bankruptcy When You are expecting an Income Tax Refund or Inheritance
In bankruptcy proceeding Income Tax Refunds are treated like cash, which depending on what exemption scheme you use and the extent of your assets will determine whether or not you are able to keep it. The same holds true if you are expecting an inheritance within 6 months after filing for bankruptcy as it is considered to be part of the bankruptcy estate. The point is that certain cash on its way to you while in the midst of a bankruptcy proceeding may or may not be exempt. Both a tax refund and an inheritance are considered to be assets that can be liquidated if your bankruptcy exemptions aren't enough to protect them. You should go over the facts with your lawyer in order to decide whether your expected Income Tax Refund or Inheritance will be considered exempt.
- 11. Not Hiring a Bankruptcy Lawyer
If your Texas Home is getting foreclosed on and you want to file Chapter 13 Bankruptcy to Stop Foreclosure, there’s no law or formal requirement that says you have to need a lawyer to file. But if you don’t have any legal experience or any experience dealing with the Bankruptcy Court, the process can be quite frustrating and even to your disadvantage should you encounter a problem. Keep in mind that everyone involved in the bankruptcy process is a lawyer, or has an attorney representing them. The Judge is a lawyer, and the Court has the US Trustee who is a lawyer, the Chapter 13 Trustee is a lawyer, and has a lawyer, and the lender foreclosing has a lawyer. If you are the only one without legal assistance, you are probably at a disadvantage. You can be compelled by the other side into making bad decisions, loose property, or even become subject to further legal proceedings if you do not know your legal rights. In most cases, it’s more expensive to hire a lawyer to fix problems than it is to assist you from start to finish. Since the one thing that most Austin homeowners up for foreclosure have in common with every other Texas homeowner facing foreclosure a lack of available money. This can prompt them to consider filing their bankruptcy case without a lawyer. If it’s a matter of money, keep in mind that The Law Offices of R.J.Atkinson files most Texas Chapter 13 Bankruptcy cases for the $274.00 Court Filing Fee with no money down on attorney’s fees. And, the attorney’s fees can be included in your Chapter 13 Payment plan. Each situation is different, so we may require some money down on attorney’s fees in some cases, but don’t let lack of money upfront prevent you from not getting legal representation. With your home at stake you owe it to yourself and your family to get bankruptcy help if you need it.
- 12. Waiting Until the Last Minute Before Filing Bankruptcy
The moment you file a bankruptcy an "automatic stay" if Bankruptcy takes affect which prevents your creditors from taking any further collection activity against you. If you wait until a creditor has already filed a lawsuit, or even obtained a judgment before consulting an Houston Bankruptcy Attorney, it may make your filing a bit more time consuming. Just know that filing for bankruptcy isn’t as easy as filling out a few forms. You and your lawyer will spend considerable time to prepare your Bankruptcy Petition, Schedules, and Statement of Financial Affairs. After they’re completed, you’ll need time to review the relevant documentation, and obtain a certificate from an approved credit counseling agency. If you have a repossession or foreclosure waiting to the last minute can further complicate things. Before the latest changes to the Bankruptcy Code, if you were facing foreclosure and were going to file Chapter 13 Bankruptcy to stop a foreclosure, you could simply file your case the very morning of the foreclosure sale providing only the initial petition which was about 2-3 pages to stop the sale. There was no additional paperwork or pre-filing requirements. If there were problems with the filing, or the information on the schedules was inaccurate, then you could simply amend the documents accordingly and file the remainder of the paperwork days, weeks or sometimes even a month later, and still stop the foreclosure. This is not the case anymore. Under the current law, the automatic stay has certain limitations for previous filers and there are pre filing requirements which actually prevent you from filing for bankruptcy moments before a foreclosure sale. Whether you file a Chapter 7 to get rid of Credit Card Debt or a Chapter 13 to Stop Foreclosure, the pre-filing requirements can present irreparable consequences for those people who wait to the last day or the last minute before filing bankruptcy.
If you contact an Houston Bankruptcy Lawyer early on instead of waiting until the last minute before even contemplating bankruptcy, you will have more time to weigh all of your options and alleviate a great deal of stress should you decide to file for Bankruptcy.
- 13. Withholding Information from Your Bankruptcy Attorney
When you hire an Attorney to handle your Bankruptcy case, or to represent you in any other legal matter, it’s always a good idea to be forthright, and candid about your situation. An Attorney can’t properly represent you if they don’t know the whole story or have incomplete information. Bankruptcy Attorneys can oftentimes become frustrated at the section ยง 341 meeting of the creditors when a client is placed under oath under penalty of perjury, and suddenly discloses information that was previously withheld. Quite often, this “new” or previously undisclosed information negates or invokes suspicion upon the client because they already signed their Bankruptcy Petition, Schedules, and Statement of Financial Affairs under penalty of perjury, yet what they suddenly disclose is not consistent with what they already provided. As you may imagine, this can’t be good. Nobody wants a surprise that can get your case dismissed, converted, get you sanctions, challenge to discharge, or worse yet criminal fraud charges. You should provide your Bankruptcy Attorney with all the information needed to properly advise and represent you. If you inadvertently fail to disclose the family pet as an asset, or your children’s toys, it’s possible that a Trustee may not charge you with fraud, but if you fail to disclose a $7500.00 cash advance 10 days before filing, a vacation home, or some other vital information, you could end up perjuring yourself and facing bigger problems. The bottom line is to make sure you provide your attorney with all the information needed to properly represent you.
Other Bankruptcy Mistakes to Avoid…
There are many other things that you should avoid doing before or during a bankruptcy proceeding which can be discussed with an experienced Houston Bankruptcy Lawyer at The Law Offices of R.J.Atkinson at a free initial consultation.
Whether you live in Houston, San Antonio, Dallas, Austin, San Marcos, Waco, New Braunfels, Victoria, Plano, Arlington, Garland, Irving, The Woodlands, Humble, Addison, or most anywhere in the State of Texas, if you are facing overwhelming debt, don’t wait until the last minute to see what your options under Bankruptcy are.
If you need Debt Relief Contact the Houston Bankruptcy Lawyers at The Law Offices of R.J.Atkinson for a free bankruptcy evaluation to see how we can help you with your Debt Problems.
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Contact Houston Bankruptcy Lawyer R.J.Atkinson at: 713-862-1700
