Common Bankruptcy Mistakes that You Should Avoid

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San Jose Bankruptcy Lawyer – Santa Clara and Surrounding Counties

Here are some common financial mistakes that you should avoid:

  1. Using a Home Equity Loan To Pay Bills As an alternative to Filing Bankruptcy –  Often times people with very good intentions put off the inevitable by getting a home equity loan to pay off credit cards.  Then they end up losing their home when they cannot afford the home equity loan payments. Consider that when you don’t pay your credit cards on time (or at all), the  creditors only harass you (and sue you…but you don’t loose your home).  On the other hand, if you don’t pay your home equity loan, you WILL lose your house. So, before you get a home equity loan, you should learn how bankruptcy might be able to help you.

  1. Getting A Retirement Loan or Cashing In An IRA Instead Of Filing Bankruptcy – Don’t cheat your future because of your current financial difficulties.  If you are in financial trouble, you should address and fix the underlying problem.  Bankruptcy might be the best answer.  Many people put off the inevitable by borrowing from a 401(k) or cashing out their IRA in order to pay credit cards.  You are not required to do that.  It is usually better to save your long term retirement for a time when you will likely not have the ability to earn an income.  You might be in tight financial times right now, but you also have the ability to earn an income right now.  Get a fresh start and protect your future retirement.  Before you reach for retirement funds, you should learn how bankruptcy might benefit you. 


  1. Waiting Too Long - It is human nature to put off unpleasant events.  Foreclosure, repossession and other collection efforts can be stopped by filing bankruptcy.  But  you have to act before your property is foreclosed.  Once the bank takes your home or repossesses your car, it is too late.   Get advice…San Jose bankruptcy lawyer Geoffrey Nwosu offers a free and confidential initial consultation to help you make an informed decision before it is too late.

  1. Failing To List All Of Your Creditors – A common mistake is to try to “protect” someone you owe by not listing them as a creditor.  This is a mistake.  There is a way to re-affirm a debt after bankruptcy.  If you do not list a creditor, then the debt you owe that creditor may not be discharged in bankruptcy.  You should list all creditors, even if you have a co-debtor/co-signer or you intend to repay that debt.  Don’t “muddy the water”.  List all of your creditors. 


  1. Reaffirming Burdensome Debt - You can reaffirm (keep) any of your debts.  Do not reaffirm debts that are unreasonable.  Doing so will make it difficult or impossible for your to recover financially.  Bankruptcy laws were written to give a person a fresh start.  You will feel better about your self when you get a fresh start and pay your bills on time.  If bankruptcy is the option you choose, accept the relief.  Do not weigh yourself down.  Get a fresh start.


  1. Having Too Much Cash – Bankruptcy laws give you a fresh start, but they do not allow you to hold onto a large sum of cash.  You are limited on how much cash you can protect in a bankruptcy case.  There are many factors that determine exactly how much cash that you can keep.  It is advisable to get the advice of an attorney to determine how much cash you can keep on hand or in a bank account. That is why we offer a free initial consultation.  .


  1. Filing Bankruptcy Before Large Tax Refund Comes – It can be tempting to try to get a financial “boost” from a tax refund after they receive a fresh start from a bankruptcy.  Don’t count on it.  Tax refunds are treated just like cash in the bank. As stated above, there is a limit on how much cash you can protect in a bankruptcy case.  


  1. Extensive Credit Card Use Two Years Prior to Filing Bankruptcy- Large cash advances, balance transfers or purchases in the 24 months before filing will be a reason for choosing a Chapter 13 bankruptcy over a Chapter 7 bankruptcy. The legal issue is that the court will consider is whether or not you were increasing your debt at a time that you could not afford to repay it. If the credit card company can show that, then you may be stuck with that credit card debt in a Chapter 7. There are many factors that must be considered before you file bankruptcy.  A qualified attorney can help.  Be sure to discuss recent credit card activity with your attorney.


  1. Repaying Family Members, Friends or Business Partners Before Filing – many people try to debts to friends, family or business partners before they file bankruptcy.  The court views this as an unfair move on your part and there are consequences to showing preferential treatment to one creditor over another.  In a Chapter 7, those “preferences” can be taken back, then distributed to creditors on a pro-rata basis. If the Chapter 7 trustee cannot recover those preferences (the money you paid prior to filing bankruptcy), then he can use that as a basis for objecting to your discharge, which then forces you to come up with the money that you paid.   Essentially, you will pay the debt twice. So, don’t do it. In a Chapter 13, all it does is increase the monthly plan payment.


  1. Transferring Assets – Sometimes people will give valuable assets to a friend or family member prior to filing bankruptcy so that the asset will not be taken by creditors.  Assets transferred in anticipation of filing bankruptcy may be recovered by the Trustee in a Chapter 7 as a fraudulent transfer. In a Chapter 13, it would cause your plan payment to increase. Besides, you can protect your stuff while it’s in your possession or control, but not after you have given it to someone.  Find a qualified bankruptcy attorney who can give you confidential legal advice. 


  1. Owing Back Child Support – Bankruptcy laws and courts frown on owing child support.  The bankruptcy laws do not let you out of child support payments and things will go much better for you if you are caught up on your child support payments. Do this to protect the things you want to keep, like your house and your car. You should discuss back-owed child support with your attorney before filing bankruptcy. 


  1. Expecting An Inheritance – Property inherited within 6 months after filing bankruptcy is deemed to be part of the bankruptcy estate.  If you expect an inheritance, make sure that you discuss this with your attorney.  


  1. Intending On Selling Your House Before Your Bankruptcy Case Is Over – This is only an issue in a Chapter 13 case because it lasts 3-5 years, whereas a Chapter 7 only lasts 90 days.   Selling your house while you are in bankruptcy can be very complicated.  If you think that you must sell your house before your bankruptcy is discharged, discuss it with your attorney to find alternatives.

  1. Missing The Hearing – Unlike some other kinds of courts, bankruptcy court requires you to attend your own hearing.  If you do not attend your hearing (also known as the 341 Meeting of Creditors), then your case may be dismissed.  You must bring to the meeting a photo ID and proof of your Social Security number.    

Conclusion:

If you have made any of the mistakes listed above, do not worry.  Most of these mistakes can be corrected.  But you must realize that anything you do shortly before filing bankruptcy is scrutinized closely by the bankruptcy court.  Discuss any concerns related to the above issues with your attorney.  Let your attorney guide you through the process to make sure that your debts get properly discharged and you receive a fresh start.


San Jose Bankruptcy attorney Geoffrey Nwosu offers a free and confidential initial consultation.  Call us at 408-912-5983 to schedule a free initial consultation to see how bankruptcy would apply to your specific situation.




Law Offices of Geoffrey C. Nwosu

1710 Hamilton Ave.
San Jose, CA 95125

Phone:   
(408) 912-5983
(408) 375-7703
.

 

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Copyright Law Offices of Geoffrey C.Nwosu 2004 to 2010

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