In the last article in this two part series I provided you with a brief summary of what bankruptcy was, what the Chapters mean, and a list of things to avoid doing once you have made the decision to file for bankruptcy. Continuing on, if you are declaring bankruptcy, don’t liquidate your retirement account. First, it is not necessary to do this because retirement accounts are usually exempt property under the law, no matter which chapter you file. Also, if you withdraw this money early, this means liability for penalties and taxes which may not be discharged in your bankruptcy.
This next “don’t” won’t make you feel so good, but it is prudent to do so. When you are paying back creditors, don’t favor your family members. This is because even though they may be your blood, as far as the law is concerned, relatives have the exact same legal status as all of the other creditors that you owe. It is understandable that you may want to pay back the people you love nearly and dearly the most, but bankruptcy courts are not exactly known for eliciting warm, fuzzy, sympathetic feelings.
Before you declare bankruptcy, don’t transfer property out of your name. If a fair price was not received, this action can be undone, and it can certainly be undone if it were made with the purpose to hinder, defraud, or delay a creditor. Relatives and friends can fall into this category as well.
Do not utilize your equity line of credit to pay off your creditors. This is because under most state and federal laws, you have the capacity to claim exemption for your home equity. So if you do not use your equity line, you can file for bankruptcy and still be able to hold onto your equity. Think about it in this way: if you utilized your equity line to pay back creditors or to take out another mortgage, what you would be doing in a nutshell would be converting debt that could have been discharged in bankruptcy into debt that you will still have to pay in order to keep your home.
To finish the article I will leave you with one DO: make sure you have a good lawyer, and always tell her the full truth and let her know all of your worries and concerns. Courts take themselves and their rules very seriously and have the ability to file criminal charges if you intentionally commit fraud. And even if they did not go that far, they always have the capacity to hold you accountable for any debt that they want, or even to simply dismiss your entire case.
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