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7 Bankruptcy Mistakes

Seven Bankruptcy Mistakes

1. The "Credit Card Run-Up" Mistake:

Do not use your credit cards once you have made your decision to file bankruptcy. Consumer debts incurred for luxury goods and services owed to a single creditor in excess of $500.00 within 90 days of filing are presumed to be nondischargeable and may not be wiped out by a bankruptcy.

Cash advances of more than $750.00 within 70 days of filing are also presumed to be nondischargeable and may not be wiped out by a bankruptcy. Do not jeopardize your "fresh start" by running up your credit cards.

2. The "Repay a Family Member" Mistake:

With regard to repaying debts, you cannot treat your family member any better than you would an ordinary creditor. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy.

3. The "Liquidate Your Retirement Account" Mistake:

Retirement accounts are generally protected. You can eliminate your debt and keep whatever you have in an ERISA qualified account, free and clear. Many individuals drain their retirement accounts in a futile attempt to pay down credit card debt.

4. The "Transfer Property out of Your Name" Mistake:

A bankruptcy trustee can undo a transfer of property that previously belonged to you. This can occur if the transfer was made within two years of the filing of the bankruptcy with the intent to hinder, delay or defraud a creditor.

5. The "Line of Credit/Second Mortgage to Pay Debt" Mistake:

Do not take a loan against your real estate in an effort to reduce the equity. You can generally file bankruptcy and not lose this valuable asset. If you take out a second mortgage to pay credit card debt, you may be putting your house at risk.

6. The "Failure to Appear at Court Proceedings" Mistake:

If there is a collection case pending against you in state or federal court, do not assume that you can avoid the court process simply because you have decided to file bankruptcy. Until your bankruptcy case is filed, a collection case continues.

7. The "Failure to Tell Your Attorney the Truth, the Whole Truth and Nothing but the Truth" Mistake:

An attorney can only provide advice based upon information provided by the client. Failure to notify your attorney about your assets can lead to the loss of those assets, denial of your bankruptcy case, fines, imprisonment or all of the above.

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