When you are preparing for a bankruptcy filing, there are certain mistakes you want to avoid. Failure to do so could result in your bankruptcy discharge being less effective and, in more serious cases, render you ineligible to obtain a discharge of your debt. Below are a few of the pitfalls to avoid before filing a Chapter 7 or Chapter 13 case:
· Waiting too long to file. If you are facing financial struggles, the longer you wait to seek bankruptcy protection, the more likely you are to lose money or assets through garnishments, repossessions or foreclosure. It is especially important not to wait until you have judgments pending against you. As soon as a collection lawsuit is threatened or filed, you should contact us for help.
· Large credit usage shortly before filing. When you are struggling financially, it is normal to use credit cards to cover your living expenses. However, certain charges made on your credit cards within 90 days prior to your bankruptcy filing may be held to be non-dischargeable (you remain liable to pay them). It is vital that you inform us if you have had any activity on your credit cards in the 90 days leading up to your filing. Also, the law requires you to stop using your credit cards once your bankruptcy case has been filed.
· Transferring assets. If you try to pay back a family member or friend that you owe money to before your bankruptcy filing, it can be considered a “preference” and the funds will be taken back by the trustee. You also cannot transfer assets in anticipation of bankruptcy. This can be considered a fraudulent transfer.
· Using retirement accounts to pay unsecured debts. You should never try to avoid filing a bankruptcy case by depleting your retirement fund to pay unsecured debts. A qualifying retirement account is exempted from being included in your bankruptcy estate, which means you get to keep this money after you obtain your discharge order.
· Debt settlement scams. There are many companies out there making promises to eliminate your debt. However, for most people, bankruptcy is the only meaningful way to comprehensively eliminate debt. Debt settlement can be expensive, especially if you get caught in a scam. Don’t put your finances in further jeopardy. Seek help from a bankruptcy attorney that you know you can trust.
Let us help you prepare for obtaining the debt relief you need through a Chapter 7 or Chapter 13 filing.
If you would like to learn more about your debt relief options, now is the time to schedule a free initial consultation with a New Jersey bankruptcy lawyer at Levitt & Slafkes, P.C. Contact our attorneys online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation.