What Not to Do Before Filing Bankruptcy

What Not to Do Before Filing Bankruptcy

If you have been considering filing bankruptcy, you’ve probably seen lists of things to do before you start. But do you know that there are things that you should not do before filing? In fact, there are some things that, if done right before filing bankruptcy, could not only hurt your chances of being awarded the debt relief, but could also result in criminal charges. Before you take the legal step of filing bankruptcy, consider if you have recently done any of these things, which could be big red flags to a court:

Signing Property Over to Someone Else

Even if you sold something in a totally unrelated move to your bankruptcy, or awarded some property to a relative as a gift – these kinds of actions could be seen as fraud. It appears to the courts that you are trying to stop your assets from being seized to pay back creditors, and no amount of coincidence is permitted for a bankruptcy filing. If you have recently sold or moved some property to a new owner, you’ll need to wait to file your bankruptcy till this is not a recent development.

Racking Up New Debt in the Past 3 Months

Showing up to a bankruptcy hearing with a ton of recent debt that you want erased is always a no-no. The judge will accuse you of racking up that debt with no intention to ever pay it back, because you had an inkling that you’d be filing for bankruptcy. This doesn’t just mean opening new lines of credit – it can mean maxing out your current credit cards, for example. So if you are living so close to the edge that you must use your credit cards to stay afloat, you likely need to consider waiting to file bankruptcy until you’re able to cut back on the credit card use.

Procrastinating Your Taxes

If you have been putting off doing your taxes, that will cause problems for a bankruptcy hearing. Your tax return is used to determine your income and other assets, and there are very few circumstances in which a bankruptcy hearing would happen without one. If you haven’t done your taxes, you’ll need to do that before you file for bankruptcy in New York City.

Paying Creditors or Private Lenders

Here’s an interesting one that many people wouldn’t guess could be held against them. If you pay off a creditor, or pay back a personal loan from a friend or family member, and then file for bankruptcy right after, it could be seen as a negative thing. Basically, the bankruptcy trustee may see this as you giving preferential treatment to certain lenders, ensuring that they get all their money back, while the rest of your creditors only get a small portion back according to the bankruptcy hearing. It can also be taken as a sign that you do have the ability to pay back your creditors. In some circumstances, these payments could even be reversed by the bankruptcy trustee, meaning that creditor (even a private individual who just gave you a cash loan) could have their money revoked.

Not Working with a Bankruptcy Lawyer

The courts’ job is to ensure that debtors get as much as they can out of a bankruptcy deal. That means that the trustee will be digging deep into your assets, looking for anything they can seize to cover the costs of your debts – or setting up a payment plan that may not work for you. By working with a bankruptcy lawyer in NYC, you get a representative on your side that is working to protect your assets. Call us at 212-244-2882 to learn more.

William Waldner