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Often, clients consult with an attorney
regarding a possible bankruptcy after they
have taken actions that can cause them
problems with a bankruptcy case. Usually,
these things are done because they
misunderstand what their rights and
responsibilities are when they file a
bankruptcy case. Most bankruptcy attorneys
find that their clients would have been in a
much better position if they had sought
legal advice months before they actually
came in for their first consultation. These
are the most common things that people who
are considering bankruptcy should remember:
1. DO NOT USE YOUR RETIREMENT, SAVINGS,
OR HOME EQUITY TO PAY CREDIT CARD BILLS
Many people do not realize that their
retirement accounts, savings accounts, and
home equity are usually safe from creditors,
both inside and outside bankruptcy. Before
using up those assets to pay unsecured
debts, such as credit cards, medical bills,
signature loans, and other debts, you should
consult with an attorney and get advice
about your options. Once those assets are
gone, it is very difficult to rebuild them,
and too often, people end up filing
bankruptcy only after they have used up all
of their assets in a futile attempt to keep
their heads above water.
2. MAKE A LIST OF WHAT YOU OWE AND
COMPARE IT TO YOUR INCOME
Often, people are afraid to learn the truth
about their own financial condition, and
have only a vague idea of how much they
actually owe their creditors. Add up the
balances on your credit cards and other
bills, and draw up a budget based upon your
current income. You may find that your
attempts to repay your debts are
unrealistic, and that bankruptcy or some
other option may be the only way for you to
ever get out from under the burden of debt
and rebuild your financial security.
3. RECOGNIZE THE DANGER SIGNS
If you are making only your minimum credit
card payments, using your credit cards to
buy necessities such as groceries and
gasoline, and are unable to handle even the
most minor emergencies, you should consider
getting some advice about your options.
Getting caught in the endless cycle of
making minimum payments and then charging
your credit cards up to the limit again each
month just to stay afloat is a dead-end
street. You are paying sometimes as much as
35% interest just to use your own money to
buy the things you and your family need to
survive.
4. STOP PAYING DEBTS THAT CAN BE
DISCHARGED IN BANKRUPTCY
Credit card debt is almost always
dischargeable in bankruptcy. Even if you
make enough money to pay back some portion
or all of your credit card debt in a
bankruptcy case, the repayment will be at 0%
interest. The money you are using to pay
those creditors could be much better used to
pay off such things as car notes and other
secured debts, and to get caught up on the
things that your family needs.
5. STOP USING CREDIT
If you are considering bankruptcy, you must
also stop using your credit cards and not
incur any other debt. In particular, it is
very unwise to take out cash advances,
charge your credit cards up to the limit, or
buy anything unusually expensive with your
credit cards before filing bankruptcy. Some
of those actions could be considered
fraudulent, and you might have to repay all
or some of those amounts, which would make
filing a bankruptcy case much less helpful
to you.
6. DON’T GIVE AWAY MONEY, PROPERTY OR
ASSETS
People often consider transferring property
to a family member, paying back a “loan” to
a friend or family member, or otherwise
attempting to conceal or safeguard assets
before filing bankruptcy. Usually, those
things are unnecessary, since most people
can keep all of their property when they
file a bankruptcy case. Such actions may be
considered fraudulent and create problems
that would otherwise not have existed. You
should always consult with your lawyer
before transferring or giving away property
if you are considering bankruptcy.
7. PULL YOUR CREDIT REPORTS
Whether you decide to file a bankruptcy case
or not, it is a good idea to pull each of
your credit reports every year and see if
there is any indication of fraudulent
activity or inaccuracy on your reports. You
are entitled to one free credit report each
year from each of the three credit reporting
agencies. The Web site for the free reports
is
AnnualCreditReport.com.
There are other credit report sites that are
heavily advertised but are not free, and
charge fees for credit monitoring, credit
scores, and other unnecessary services. If
you consult with a lawyer regarding a
bankruptcy, you will need to provide your
credit reports so that none of your
creditors is excluded from your case, and it
would be helpful to have that information at
the time of your first consultation with a
lawyer.
8. FILE YOUR TAX RETURNS
If you have not filed tax returns that have
become due, you must do so before you can
file a bankruptcy case. You will have to
provide your last two tax returns to the
bankruptcy trustee once your case is filed,
and the IRS is informed of every bankruptcy
filing. If there are tax years for which you
have not filed returns, the IRS will file a
claim in your case and possibly assess much
more in taxes than you actually owe. It is
best to file your own return so any amounts
due will be as accurate as possible.
9. CONSULT WITH AN EXPERIENCED BANKRUPTCY
ATTORNEY
Bankruptcy is a very complex area of the
law, and you should find a lawyer who is
experienced and well-versed in that field.
Be sure that your case will be handled
personally by a lawyer from start to finish.
Many of the large bankruptcy “mills” will
assign your case to a paralegal, and there
will be very little involvement by an
attorney unless a problem arises. If a
lawyer is handling your case from the
beginning, any potential problems can
usually be taken care of before they become
real problems.
10. TELL YOUR LAWYER EVERYTHING
For example, if you have a piece of real
estate or other property that you don’t want
to lose, the best way to protect it is to
tell your lawyer about it. Your lawyer will
be able to advise you about how to protect
your property, but only if he or she knows
all the facts. When your case is filed, it
will be assigned to a trustee. The trustee’s
job is to make sure that everyone plays by
the rules, and he or she will often consult
county and state records to determine if a
debtor owns real estate, vehicles, or other
property that is not listed by the debtor in
the paperwork filed with the court.
Bankruptcy cases are filed in federal court,
under penalty of perjury, and bankruptcy
fraud is punishable by large fines and
imprisonment for terms up to 20 years. It is
not worth the risk to try and conceal
property from your lawyer or the trustee, so
tell your lawyer everything so you can be
protected and receive the benefit of your
bankruptcy discharge.
Kraft & Associates is a federally designated
Debt Relief Agency under the United States
Bankruptcy Code. We assist people with
finding solutions to their debt problems
including, where appropriate, assisting them
with the filing of petitions for relief
under the U.S. Bankruptcy Code.
Kraft & Associates
2777 Stemmons Freeway
Suite 1300
Dallas, Texas 75207
Dallas: (214) 999-9999
Fort Worth: (817) 999-9999
Toll Free: (800) 989-9999
FAX: (214) 637-2118
E-mail: info@kraftlaw.com
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