debt

12 bankruptcy don'ts for 2012

Justin HarelikMany people find themselves in financial turmoil and finally decide that enough is enough; it's time to file bankruptcy. The goal is for a fresh start from the monthly burden of trying to pay bills when there is not enough income to do so.

Bankruptcy happens. When it happens to you, try to avoid the following 12 common mistakes.

Tip 1Don't lie

The vast majority of those who file for bankruptcy protection do qualify. Those who don't will generally have other options available to them. Deciding to file anyway -- despite not qualifying -- by leaving out assets or income could result in the case being dismissed and the filer being barred from filing on those particular debts ever again.

Tip 2Don't leave out income

People think that a second, part-time job does not count as income. All household income must be included, even the $300 per month your son earns working part time while in school. If you want to claim him as a dependent in your bankruptcy, you must include his income.

Tip 3Don't leave out cars

Clients always say, "I don't want to lose my car. Why are you listing it in the paperwork?" The car is an asset (or a liability if it is secured by a loan). It must be listed, and the court-appointed trustee reviewing your case must know about every car you own. Even a car driven by your son, which was never transferred into his name, must be listed. And don't transfer it to him prior to filing. That's the best way to lose it.

Tip 4Don't leave out car loans

You must notify all your creditors, even car lenders, that you have filed bankruptcy. You can usually keep the car, but the lender may have specific requirements you must follow. Failure to notify the lender may result in the loss of the car.

Tip 5Don't leave out creditors

Every month, a former client calls and says that he or she cannot use a particular credit card even though that card was not listed in the bankruptcy. The majority of credit card companies centralize the processing of credit card payments and services. Card companies will know that you filed for bankruptcy protection even if you don't have a balance on that particular card. So don't try to hide a credit card. You can get new credit after the bankruptcy. It is not worth it to leave out any creditor.

There is one big exception to this rule, and it pertains to credit unions. You may be able to keep an account with a credit union after filing for bankruptcy. Discuss this option with the credit union before filing your case.

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