People who are considering filing for bankruptcy often think about what they need to do to prepare for their case, such as gathering their bills, collecting paystubs, and maybe even looking up an experienced Cleveland bankruptcy lawyer. Our experienced lawyers at Luftman, Heck & Associates can help. Call us at (216) 586-6600.
There are also several things you should definitely not do if you’re thinking about bankruptcy. To ensure your case goes smoothly, avoid making these five mistakes.
Five Common Mistakes Made By People Considering Bankruptcy
1.Paying off your creditors. The whole point of filing for bankruptcy is to get some or all of your debt dismissed. Certain unsecured debts like credit cards, medical bills, and other types of personal loans can be discharged in Chapter 7 bankruptcy. If you decide to file for Chapter 13 bankruptcy, you can create a new payment plan for your debts that is more affordable.
2. Maxing out your credit cards. It may be tempting to go on a shopping spree before filing for bankruptcy, knowing that your credit cards bills will likely get discharged. But the court reviews all of your financial documents, and an uptick in spending right before your file date will be difficult to miss. You might find that these bills do not get discharged, which means you’ll still be on the hook to pay them.
3. Cashing out your retirement savings. Employees under the age of 59 ½ may be permitted to take a loan against their retirement accounts. If you take a loan against your 401(k), you generally pay yourself back with automatic payments from your paycheck. But using a loan from a retirement account to pay off some of your debt can be a risky move. If, for example, you leave your job before you’ve paid the loan back, the unpaid balance is treated as a 401(k) withdrawal, and you will incur taxes and possibly an early withdrawal penalty if you’re under retirement age. It’s best to talk to your bankruptcy attorney before you decide to take money out of savings to pay bills.
4. Transferring your assets. If you’re worried you may lose your house, your car, or some other asset, you may decide to transfer it to another person to “hide” it from your bankruptcy. But remember the court will investigate every one of your financial documents for the past several years, and they will notice if your house is suddenly owned by your best friend. Keep in mind that many people who have filed for bankruptcy have attempted to hide assets before, so the court has some experience uncovering these activities. Hiding assets is a good way to get your case dismissed and possibly even be charged with fraud. It’s important to remember that the state permits a certain amount of exemptions in bankruptcy cases, so filing doesn’t mean you automatically lose everything you own. You may want to talk to a bankruptcy attorney about what you will be allowed to keep after a bankruptcy.
5. Deciding to file on your own. It’s not uncommon for people to consider filing for bankruptcy themselves. After all, attorneys charge a fee, and that fee usually must be collected in full before the case is filed. But hiring an experienced attorney could end up saving you money – your case can move smoothly through the process, leaving you debt-free in as little as four months. Having representation provides peace of mind, too. Your attorney handles paperwork, questions from the trustee or any creditors, and court appearances; you need only need to be present for a short Meeting of Creditors. For the first time in a while, you won’t feel the constant stress of finding money to pay your bills.
Call a Cleveland Bankruptcy Lawyer
When you’re considering bankruptcy, the first thing you should do is call a bankruptcy attorney. The attorneys at Luftman, Heck & Associates are available to talk about your situation and help you make the best decisions to eliminate your financial burden.