When you enter into the Bankruptcy Process in Minnesota, or in any state, you should avoid making these common mistakes. Working with a bankruptcy attorney, if you are open and honest and trust your lawyer, will generally ensure you don’t unintentionally do anything you shouldn’t.
#1 - Don’t Withhold Info from Your Lawyer
This is one of the BIGGEST mistakes you could make during your bankruptcy. The reason to use a bankruptcy attorney in the first place is so he or she can help you through your bankruptcy and represent you in court. Your bankruptcy attorney cannot effectively do his or her job if you don’t give the whole truth. Regardless of how embarrassing it is, or how ashamed you feel, tell your lawyer everything. They aren’t going to judge you; they are going to help you get your life back.
#2 - Don’t Use Credit
Don’t touch your credit after you decide to file bankruptcy. Don’t use it to make purchases and don’t pay off your accounts. Some people who choose to file bankruptcy purposely or inadvertently make purchases on credit, thinking those will be included in their filing. According to Legal Tips and Commentary, “Charges for luxury goods and services owed to a single creditor, totaling more than $500.00 within 90 days of filing, are presumed non-dischargeable and may be found to be due and owing. Cash advances totaling to more than $750.00 for all creditors within 70 days of filing are also presumed non-dischargeable and may be found to be due and owing.”
#3 - Don’t Pay Family or Friends
If you have borrowed money from a family member or friend, you cannot choose to pay them back if you are unable to make payments to your creditors. Unfortunately, people close to you must be treated the same as your creditors. If you do pay them back you put them at risk of legal action, because your bankruptcy court trustee can reclaim that money you paid.
#4 - Don’t Transfer Property
Another common mistake debtors make is transferring property out of their name so they don’t have to include it in their bankruptcy. You cannot purposefully transfer any property to affect your bankruptcy within 4 years of your filing.
#5 - Don’t Ignore Lawsuits
Simply choosing to file bankruptcy DOES NOT stop lawsuits from proceeding. You cannot miss a court date just because you are filing bankruptcy. The automatic stay, a legal order requiring creditors to stop collection attempts, is not initiated until you have completed your case filing. A completed case filing includes completing and submitting all necessary forms, completing credit counseling and paying all court fees.
If a lawsuit is initiated prior to completing your filing you must appear in court and follow proceedings until your lawyer tells you otherwise.
#6 - Don’t Touch Your Retirement Account
Qualified retirement accounts are protected in bankruptcy filings – so do not use your retirement account savings to pay off some of your debt. Doing this often results in paying early access fees and eliminates your chance for a comfortable retirement.
#7 - Don’t Put Your House at Risk
Prior to filing bankruptcy, don’t take out a home equity loan to make payments on your debt. Doing this turns your unsecured credit card debt into secured debt, which means, when you are unable to make payments your creditors can take your house.
A mistake made even before entering into the bankruptcy process in Minnesota and across the nation, is not considering bankruptcy as a debt solution. Don’t be scared of the work BANKRUPTCY. That is the biggest mistake of all. Download our Debt Solutions 101 eBook to learn more about each personal bankruptcy process in Minnesota, Chapter 7 and Chapter 13, and how working with a bankruptcy attorney can help you get your life and financial situation back under control.
