debt

12 bankruptcy don'ts for 2012

Tip 6Don't transfer assets out of your name before filing

Transferring an asset prior to filing for the purpose of protecting that asset is illegal. Just because you have an asset you want to protect does not mean you can give it away. A competent bankruptcy attorney can discuss how to legally protect an asset that might otherwise be at risk.

Tip 7Don't pay back family prior to filing

You may owe your mother $10,000 and have every intention of paying her back. Just don't pay her back in the 12 months prior to filing. No matter what you think, she is still a creditor like your department store or bank where you hold your credit card. However, the bankruptcy code looks even more harshly on payments made to family prior to filing. Know the rules concerning payment to creditors prior to filing your case.

Tip 8Don't forget to list all potential or pending lawsuits you have against anyone

You are suing your former employer for unpaid wages, or you are suing your former best friend for unpaid rent. Those are assets and must be listed as such in your bankruptcy paperwork. You may be able to continue with the case, but the court-appointed trustee must know about those claims or potential claims.

You may even lose the right to continue with a potential lawsuit because the court-appointed trustee might be interested in taking over your lawsuit on your behalf. The lawsuit becomes an asset in your bankruptcy case and may have significant value. This is a complicated topic, but failing to list potential or pending lawsuits is a common mistake made by bankruptcy filers.

Tip 9Don't gamble

Even gambling with your own money can have negative implications in bankruptcy. Any gambling losses in the 12 months prior to filing must be disclosed in the bankruptcy paperwork.

Tip 10Don't run up credit card balances prior to filing

Many potential filers say that they are going to use up all their available credit before filing for bankruptcy. This usually does not work for the filer. The creditor will review your credit card charges after receiving the bankruptcy notification. If the creditor believes you ran up your credit card balances before filing, it has the right to challenge your request to eliminate some or all of your balance. You could end up owing money on a few of your credit cards after your bankruptcy is over.

Tip 11Don't wait until the last minute

Don't wait until your wages are garnished, your bank account is levied, or your home foreclosure sale is the next day. You want to have the luxury to prepare a legal and thorough bankruptcy petition. Rushing your filing may not allow for a diligent and competent investigation of your bankruptcy qualifications.

Tip 10Don't become depressed

Taking the ostrich approach to your situation will never resolve it. It is normal and reasonable for you to get upset or feel depressed that you are in a difficult financial position. Unfortunately, avoiding your financial straits will not resolve them. Sometimes, bankruptcy is your best solution.

Again, bankruptcy does happen to good people. Your case can go smoothly as long as you disclose all information required to receive your fresh start.

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