In part 2, we continue to examine ways to help ensure that you will be successful in avoiding problems in a bankruptcy that you may file.
8) Often I see people fail to list their business, LLC, S-Corp, etc. when they come in to see me for bankruptcy advice. If you own a business, or a part ownership interest in a business, you must disclose it. There may be no bankruptcy protection for this asset and it is really important to discuss this with your attorney beforehand.
9) Do not purchase a home or other large asset before bankruptcy without discussing it first. Sometimes you may be advised to make the purchase, sometimes not. This is a very sensitive issue and there is really no “one size fits all” answer. I have recommended that these kinds of purchases be made, and in other cases not be made, depending on the individual circumstances.
10) Do not give gifts to others before bankruptcy. Often if the property you intend to give is yours, there is bankruptcy protection for it, and it is safe in your bankruptcy. You will not lose it. But, if you give the property away, it could be considered an “insider transfer” and the property might be recovered by the trustee in bankruptcy. An avoidable loss.
11) Do not try to pay off one creditor before bankruptcy. Sometimes people want to “favor” a particular creditor, perhaps their doctor, before filing. There is a rule that if you pay more than $600 to a single creditor in the 90 days before filing that the trustee can recover that money from the creditor.
12) Do not cash out IRA or other retirement plan accounts to pay bills unless you absolutely have to. Retirement accounts are protected in bankruptcy. And, your retirement should be kept for your retirement, if at all possible.
13) Do not take out a second mortgage or loan on your retirement. Often I see folks take out loans on their homes and retirement plans to pay unsecured debt before they come to see me. This is a tragedy. The home is protected up to a point, and the retirement plan is entirely protected. The unsecured debt can be discharged in a bankruptcy, but the loan on the home or retirement plan will have to be paid back.
14) Do not hide assets. It is bankruptcy fraud. Enough said.
15) Do not take out “payday loans.” Payday loans in excess of $825 are not discharged unless at least 70 days have passed between the date of the loan and the date of the filing of the bankruptcy.
16) Do not put money in bank accounts belonging to your children. This must be disclosed anyway and it looks suspicious.
17) If you file, do not “save” or “hold back” a credit card thinking that you will need it and use it after the bankruptcy is filed. While you do not have to list cards that have no balance, as they are not really debts, creditors frequently close out cards held by those who file bankruptcy. It is better to get a new card after you file.
More coming up in part three.