TOP 5 MISTAKES TO AVOID BEFORE FILING BANKRUPTCY

Once you decide to file bankruptcy it is important that you avoid certain actions.  Here are the TOP 5 Mistakes to Avoid Before Bankruptcy

1.) DO NOT TRANSFER PROPERTY INTO OR OUT OF YOUR NAME 

Most people understand that it is not a good idea to transfer property into their name before they file bankruptcy.  But there are many innocent parties who will co-sign for a home loan and end up on the title of their family or friend’s house.  This can raise huge issues in bankruptcy.  If you are asked to co-sign for a home loan before bankruptcy, don’t do it until you talk to your bankruptcy attorney.  The house you co-signed for can be in jeopardy in a bankruptcy case.

It is also vitally important that you do not transfer property out of your name and into someone else’s name before bankruptcy.  This usually happens because the bankruptcy filer has been told by a friend or relative that their house/property will be in danger in a bankruptcy case and they decide to fix the problem by executing a quitclaim deed to their family member or friend.  Once a bankruptcy case is filed, the bankruptcy court can undo transfers like these for up to 4 years in the State of California.  In many instances a transfer would not have even been necessary and the property could have been protected with a bankruptcy exemption.  It is very important to talk to your bankruptcy lawyer before you transfer any property out of your name before bankruptcy.

2.) DO NOT GIVE MONEY TO YOUR FAMILY OR FRIENDS TO HELP THEM OUT

Although you may be filing bankruptcy, there are others in your life who are asking you for help.  Large gifts can be undone by the bankruptcy court.  Do not give large amounts of money to your friends or family.  Talk to your bankruptcy lawyer before you do so.  Never, give them your credit cards to max out and take cash advances out on in order to try to help them.  If you do so, you may be engaging in bankruptcy fraud.

3.). DO NOT PAY BACK YOUR FAMILY OR FRIENDS FOR MONEY YOU BORROWED FROM THEM

You’ve been going through a tough time for the past several months or years.  And some very kind people have been helping you out along the way.  They’ve given you “loans” to help you make it through.  Now that you have decided to file bankruptcy and you are no longer paying your credit cards and loans, you have some free money on hand and decide to pay back your friends and family.  Don’t do this.  The bankruptcy court can undo preferential payments to insiders (friends and family) for up to 1 year.  Talk to your bankruptcy lawyer about this if you are considering paying them back before you file bankruptcy.

4.) DO NOT TAKE OUT NEW LOANS OR MAKE LARGE PURCHASES ON YOUR CREDIT CARDS

This is actually more rare than all of the above.  Most people understand that you should not max everything out with the intention of filing bankruptcy.  One you decide to file bankruptcy, you should stop using your credit cards and taking on new debt.  Taking on new debt with no intention of paying for it can be considered bankruptcy fraud.  Talk to your lawyer about this if you are considering doing this.

5.) DO NOT ENGAGE IN FRAUD OR ASK A BANKRUPTCY LAWYER ABOUT HOW TO DO IT THE “RIGHT” WAY

This is extremely rare.  But I’m putting this in here because in the last several months I have been asked about how to best engage in fraud by some individuals.  We will never help you engage in bankruptcy fraud.  And we know of no other bankruptcy lawyer that will ever help you to commit fraud.  This has come up because some people are looking for ways to apply for Covid related loans and take the money and somehow hide/transfer the money and then file for bankruptcy.  In my experience as a bankruptcy lawyer, I can tell you that as a profession we hate fraud more than anyone else.  We want to help good people who have come on hard times, not people who are deliberately engaged in criminal activity.

If you are looking for a one of best Lancaster bankruptcy lawyers in Southern California, please contact us.  We offer free consultations and have one of the best fees in the industry.