Posted on July 18th, 2023

Deciding to file for bankruptcy is not an easy one. It can be a challenging and overwhelming process that requires careful consideration and planning. If you find yourself in a position where bankruptcy seems like the best option for your financial situation, it's important to be aware of certain actions you should avoid before filing. In this article, we will discuss five surprising things you should never do before filing for bankruptcy to ensure a smoother process and protect your best interests.

Don't Borrow Against Your Home

One common mistake individuals make before filing for bankruptcy is borrowing against their home or taking out a second mortgage. While it may seem like a temporary solution to alleviate financial pressure, it can have serious consequences when it comes to the bankruptcy process. When you borrow against your home, you are essentially converting unsecured debt into secured debt. This means that if you fail to repay the borrowed funds, your home may be at risk of foreclosure.

In bankruptcy, your home is considered an asset that can be used to satisfy your creditors. By borrowing against your home, you may unintentionally expose it to potential liquidation. It's crucial to consult with a bankruptcy attorney before taking any steps that involve your home or other valuable assets to fully understand the implications and explore alternative options that may better suit your situation.

Don't Pay Bills from Your Retirement Accounts

Retirement accounts, such as 401(k) or IRA, are typically protected in bankruptcy proceedings. These accounts serve as a crucial safety net for your future financial security. However, some individuals make the mistake of tapping into their retirement funds to pay off debts before filing for bankruptcy. This can have detrimental effects on your financial stability in the long run.

Withdrawing money from your retirement accounts not only depletes your savings but may also trigger early withdrawal penalties and tax liabilities. Moreover, using retirement funds to pay off certain debts can be seen as preferential treatment towards specific creditors, which can complicate your bankruptcy case. It's essential to consult with a bankruptcy attorney to explore alternative strategies for managing your debts without jeopardizing your retirement savings.

Don't Transfer Money to other people

Transferring money or assets to other individuals, such as family members or friends, to shield those assets from bankruptcy proceedings is a serious mistake. These transfers can be considered fraudulent and may lead to legal consequences, including the denial of your bankruptcy discharge.

Bankruptcy laws aim to ensure fair treatment for all creditors. Transferring assets with the intent to defraud or hinder the bankruptcy process undermines this principle. It's crucial to be transparent and honest about your financial situation when filing for bankruptcy. Your bankruptcy attorney can guide you on how to navigate your assets properly and protect them within the confines of the law.

Don't Pay Back Loans from Some Lenders and Not Others

When facing financial difficulties, it's natural to prioritize certain debts over others based on personal preferences or relationships with lenders. However, selectively repaying loans or debts before filing for bankruptcy can have unintended consequences.

The bankruptcy process aims to treat all creditors equally and fairly. Paying back loans to certain lenders while neglecting others can be seen as preferential treatment, potentially leading to legal complications during your bankruptcy case. It's essential to consult with a bankruptcy attorney and follow their guidance on managing your debts and ensuring a fair distribution of your available resources among your creditors.

Don't Promise to Pay Creditors If You Know You Can't Pay Them

In an attempt to manage their debts, some individuals make promises or agreements with creditors, even though they are aware they cannot fulfill these obligations. Making false promises or misleading creditors can have severe consequences when it comes to bankruptcy proceedings.

When filing for bankruptcy, it's crucial, to be honest and transparent about your financial situation. If you make promises to pay creditors without the intention or ability to do so, it can jeopardize the success of your bankruptcy case and potentially lead to allegations of fraud. It's essential to work closely with a bankruptcy attorney who can guide you through the process and ensure that you are acting within the legal boundaries.

Seeking Professional Guidance

Filing for bankruptcy is a complex legal process that requires careful consideration and adherence to specific rules and regulations. To ensure the best outcome and protect your best interests, it's crucial to seek professional guidance from a knowledgeable bankruptcy attorney.

At Sidney Mickell, Esq, we specialize in bankruptcy attorney services and have extensive experience helping individuals navigate the bankruptcy process. Our team understands the intricacies of bankruptcy law and can provide you with the guidance you need to make informed decisions and avoid common pitfalls.

Don't Hide or Dispose of Assets

When facing the prospect of bankruptcy, some individuals may attempt to hide or dispose of assets to prevent them from being included in the bankruptcy estate. This can include transferring assets to family members, selling property at significantly reduced prices, or simply concealing assets from the bankruptcy court.

Hiding or disposing of assets is a serious offense and can have severe consequences. Bankruptcy laws require full disclosure of all assets, income, and debts. Failing to disclose or intentionally concealing assets can result in the dismissal of your bankruptcy case, loss of certain legal protections, and even criminal charges.

It's crucial to be fully transparent and disclose all your assets to your bankruptcy attorney. They can guide you on how to navigate your assets properly within the boundaries of the law and ensure compliance with the requirements of the bankruptcy process.

Don't Ignore Creditors or Lawsuits

Ignoring creditors or lawsuits brought against you by creditors is a common mistake individuals make when contemplating bankruptcy. Avoiding communication or failing to respond to legal actions can worsen your financial situation and complicate your bankruptcy case.

Engaging with your creditors and responding to any legal notices or lawsuits is essential. Ignoring them may result in default judgments against you, which can have long-lasting consequences even after filing for bankruptcy. It's important to keep lines of communication open, seek legal advice, and address any legal actions promptly to protect your rights and ensure the best possible outcome in your bankruptcy case.

Get in Touch Today

If you are considering bankruptcy and want to learn more about what to do and what to avoid before filing, we invite you to reach out to Sidney Mickell, Esq. Call us today at (323) 309-1137 for a free consultation. Our experienced team will listen to your concerns, answer your questions, and provide the personalized guidance you need to navigate the bankruptcy process successfully.

Don't let financial difficulties overwhelm you. Take the first step towards a fresh start by contacting Sidney Mickell, Esq today. You can also email us at [email protected] to schedule your free consultation. Let us help you regain control of your financial life and pave the way to a brighter future.