What Not to Do Before Filing for Bankruptcy
Sept. 19, 2022
For individuals and business owners facing financial hardship, among the promising options to achieve debt relief is by filing for bankruptcy. However, there are several collective popular notions and false assumptions out there about the bankruptcy process.
Without proper guidance, any party considering filing for bankruptcy could easily make irreversible errors that may affect the outcome of their case. A strategic Texas bankruptcy attorney can inform you about some of the things to avoid before filing for bankruptcy.
At Uloth, P.C., I enjoy providing dedicated advocacy and experienced legal counsel to clients in bankruptcy-related matters. I'm available to discuss your unique situation, educate you about what to do or avoid before filing for bankruptcy, and guide you through the Texas bankruptcy process. My firm is proud to serve clients across Dallas, Addison, and Plano, Texas.
What NOT To Do Before Filing for Bankruptcy
When thinking about bankruptcy in Texas, it is important that you know what to do – or not do – before you file. This can help prevent potential issues and make it easier to manage your bankruptcy petition. If you intend to file for bankruptcy in Texas, here are some of the things you should avoid:
Don't Pay Off Debts with Your Retirement Account
Before you file for bankruptcy, do not take out of your retirement savings and funds to settle your debts. Generally, some of these debts will be wiped off when you file for bankruptcy. Therefore, you should speak with your bankruptcy lawyer before using the money in your retirement account to settle your bills. Moreover, filing for bankruptcy will protect most of your retirement funds and assets.
Don't Acquire New Debt
Additionally, avoid acquiring new debts within 70 to 90 days before you file for bankruptcy. If you take out a new loan, the creditor may petition an "adversary proceeding" to object to your bankruptcy discharge. The lender or creditor may argue that you had no intention of repaying the new loan.
Also, the Texas bankruptcy court may consider your actions as "presumptive fraud." Thus, categorizing your new debts as non-dischargeable. In the event that you have no other alternative than to get a new loan, ensure that the money is for life necessities, such as food, clothing, and utilities.
Don't Move Assets
Furthermore, do not hide, sell, or transfer some of your assets and property to family members and friends for safekeeping when considering filing for bankruptcy. You may face criminal penalties for any of these actions. Likewise, your bankruptcy discharge may be completely denied if you sold or transferred assets prior to filing.
Don't Misrepresent Your Information
Also, do not misrepresent information in your bankruptcy paperwork. Only provide complete and accurate details about your property, income, finances, expenditures, and debt in your bankruptcy paperwork to avoid possible issues. Intentionally misrepresenting details or providing inaccurate information may bring about criminal penalties, including fines and jail time.
Don't Fail to File Your Taxes
Tax returns are important documentation for filing bankruptcy in Texas, especially a Chapter 13 repayment plan. When you file your bankruptcy petition, the Texas court will use your tax returns to calculate your previous and current earnings and property holdings. Thus, failure to file your income tax returns may constitute a major hindrance during your bankruptcy process.
Don't Selectively Pay Off Debts
In addition, do not pay back your debts selectively. Examples include paying creditors within 90 days or close relatives within one year of filing. The court may consider this as "preferential transfer," and it can be undone. In fact, the bankruptcy trustee may petition an adversarial proceeding to recover such money from the recipient. Essentially, all funds must be disbursed to creditors in equal shares.
Don't File Without Legal Guidance
Finally, it is never advisable to file for bankruptcy without experienced guidance and representation. An experienced bankruptcy lawyer can help you understand the requirements of each bankruptcy chapter, determine if you qualify, and help choose the ideal bankruptcy chapter for your unique financial condition. Also, your attorney can help complete and submit your bankruptcy forms, represent you during the court proceedings, and help negotiate a feasible repayment plan with your creditors.
The Importance of Experienced Legal Guidance
Filing a bankruptcy petition in Texas usually involves a lot of complexities. Even the slightest error or omission can possibly affect your bankruptcy proceedings or discharge process. Therefore, when considering filing for bankruptcy, consulting with a reliable bankruptcy attorney is imperative for detailed guidance and to help you make intelligent decisions.
At Uloth, P.C., I am poised and ready to advise and direct clients through the complicated procedures involved in bankruptcy filings. As your legal counsel, I can analyze your possible bankruptcy options, determine your eligibility, and decide which chapter is right for your unique financial situation. In addition, I will walk you through every legal step of your bankruptcy process and help you make informed financial decisions.
Contact Uloth, P.C. today to schedule an easy consultation with a trusted bankruptcy lawyer. I have the dependable advocacy, assistance, and knowledgeable legal guidance you need to navigate conclusions in your bankruptcy proceedings. My firm is proud to serve clients across Dallas, Addison, and Plano, Texas.