Bankruptcy Dos and Dont's

[EnergyRecruitment]

DO be honest and forthcoming on your bankruptcy petition. It is against the law to lie in bankruptcy proceedings. That means spill your guts out; you are sacrificing a small portion of your privacy to get a discharge of your debts. If you lie on your petition, or if you conceal assets, you could get in very serious trouble. The least that will happen is that your petition could be dismissed.
DO be honest and forthcoming with your attorney. Even if it is embarrassing, even if it makes you look like an idiot or a crook, it is better if your attorney knows. Giving your attorney insufficient information is like hiring a chauffeur and not telling him or her that your brakes don't work. Anything that isn't listed in your petition may not be discharged.

[EnergyRecruitment]

While you are filing your petition, you have to be very honest and forthcoming in providing all the details. Make sure that the information that you are providing is accurate and has not been manipulated. Your purpose is to get a discharge from your debts and you may not be able to achieve that by concealing your assets or providing false data on your bankruptcy petition. Such things will only guide you into a much deeper trouble.

[diane.jsmith]

Originally Posted by muslgrl

PRE-BANKRUPTCY DOS AND DON'TS

If the wolves are circling, but you aren't sure that you will have to file bankruptcy, there are some Dos and Don'ts which may protect some of your property if you do eventually have to file.

DOcontinue making payments on vehicles which you intend to keep. Creditors secured by a car or truck can usually repossess the vehicle without notice to you anytime you are in default in your payments. It will ordinarily take longer for other creditors (including those secured by other property) to act on a debt that is in default.
Note: If your car has been repossessed but not yet sold, you may be able to get it back if you file Chapter 13 immediately.

Don't borrow from or withdraw 401k, IRA, and ERISA qualified savings and retirement plans to pay bills. Early withdrawal of these funds makes you liable for penalties and taxes which may not be discharged in bankruptcy. ERISA and 401K funds are exempt from creditors in bankruptcy, as are IRA funds in Michigan (except deposits made within 6 months before filing) and many other states. If you don't use these funds, you are very likely to have them to draw on after bankruptcy.

Don'tborrow money on your home to pay unsecured (i.e. credit card, utility or medical) bills. If you take out a second mortgage on your home, you may be converting debt which would have been discharged in bankruptcy into debt which you will still have to pay in order to keep your home. These additional payments could be high enough to cause you to lose your home.

give "friendly" creditors a security interest in non-exempt property. If you have to borrow money from a friend or relative you could give that creditor a security interest in the property which you own. For example, if you have a car which is not exempt and you are borrowing money from a relative, he or she could take a security interest in the car for the loan. This will reduce your equity in the car, and the likelihood that the trustee will take the car. It will also protect your relative by insuring that they will be paid from the proceeds if the trustee does take the car since he must pay off creditors secured by property which he takes.

Caution: The loan must be a legitimate transaction (you must actually receive the money), and the security interest must be granted at the time the loan is made. You cannot give a security interest for a previous loan. Giving a security interest for an existing loan could be a transfer of a property interest in fraud of other creditors which could result in a denial of your discharge. [§ 727] All laws and formalities regarding secured transactions must be followed, such as placing the creditor's name on the title for loans secured by vehicles and the recording of a deed of trust for loans secured by real property.

pay $600 or more back to relatives or business associates who have lent you money. Payment of a total of $600 or more to an "insider" (which includes relatives and business associates) within one year before you file bankruptcy is a "preference." The trustee may recover preferences from the person that was paid and divide the money between all of your creditors. (Payment of $600 or more to any other creditor within 90 days before the case is filed is also a preference.) [§ 547]

Don'tput property you own into someone else's name to avoid it being taken by creditors or the trustee. That kind of transfer is a fraud on creditors and can result in your discharge being denied [§ 727]. In addition, the trustee can take the property from the person to whom it was transferred [§ 548].

Doreduce the amount withheld from your pay for taxes. If you expect to get a tax refund, reduce your withholding so that you do not get refund. Federal and state tax refunds are routinely taken in Chapter 7, and may effect plan payments in Chapter 13.
Caution: Don't reduce the withholding for tax so much that you will have a big tax bill to pay!



POST-FILING BANKRUPTCY DOS AND DON'TS

CHAPTER 7

If I have already filed a Chapter 7 Bankruptcy for you there are some important DOs and Don'ts which come into play during the pendency of your case.

continue making payments on vehicles which you intend to keep. Creditors secured by a car or truck can usually repossess the vehicle without notice to you anytime you are in default in your payments. It will ordinarily take longer for other creditors (including those secured by other property) to act on a debt that is in default.
Note: If your car has been repossessed but not yet sold, you may be able to get it back if you file Chapter 13 immediately.

Sell or Transfer or give away any Assets you have without contacting me first. The filing of your Chapter 7 Bankruptcy petition creates a Bankruptcy Estate which temporarily comes under the control of the Trustee who is assigned to your particular case. The Trustee's job is to Liquidate (sell and reduce to cash) any property that is not exempt under State or Federal Law. Typically, few Chapter 7's that I file have any assets that are liquidated, and usually if there are likely to be assets in a case, I will have informed you of any potential Trustee liquidation before filing. Nevertheless, DO NOT sell, give away, transfer title, settle any personal injury lawsuits or otherwise dispose of any of your property while your Chapter 7 Bankruptcy is pending.

be concerned if a few Creditors still attempt to Contact you or send you bills or collection letters after filing. 99% of your creditors will stop harassing phone calls or threatening letters shortly after the filing of your bankruptcy. By operation of law, immediately upon the filing of your bankruptcy petition, the "Automatic Stay" goes into effect. This stay prevents all of your creditors from taking any action to attempt to collect a debt. This includes calling you by phone at home or at work, sending collection letters, starting or continuing lawsuits against you, garnishing wages, repossessing vehicles or other security and foreclosing on your home. Occasionally, a creditor will still call or send a letter after the Notice of Commencement of Bankruptcy case has gone out in the mail. If this happens to you, simply send a copy of this Notice to the creditor who is still contacting you or tell them to call my office to verify the filing of your case.

call my office when you get your Notice of Meeting of Creditors (this is your Chapter 7 Court Hearing date and you MUST ATTEND. DOCUMENTATION REQUIRED AT .341 HEARING PURSUANT TO LOCAL BANKRUPTCY RULE 2003-2. Be sure to bring the following items to your hearing with you, neatly organized for the Trustee. Arrive 1/2 hour early and be prepared.

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[divorce certificate]

Do's and Don'ts - Bankruptcy

THE DO's

DO take bankruptcy seriously. It is a constitutional right, and courts take a very dim view of abuse of that right.

DO be honest and forthcoming on your bankruptcy petition. It is against the law to lie in bankruptcy proceedings. That means spill your guts out; you are sacrificing a small portion of your privacy to get a discharge of your debts. If you lie on your petition, or if you conceal assets, you could get in very serious trouble. The least that will happen is that your petition could be dismissed.

DO be honest and forthcoming with your attorney. Even if it is embarrassing, even if it makes you look like an idiot or a crook, it is better if your attorney knows. Giving your attorney insufficient information is like hiring a chauffeur and not telling him or her that your brakes don't work. Anything that isn't listed in your petition may not be discharged.

DO make yourself available to your attorney for discussions regarding the case, especially preparation of the petition and appearance at the meeting of creditors. It is not a waste of your time if it helps you to have an uneventful bankruptcy.

DO follow your attorney's advice about how to behave in the meeting of creditors. Remember, he or she does this almost every day. Don't be afraid to ask him or her if something is appropriate. It's one of the things that you are paying your lawyer for. Your attorney will tell you what he or she wants from you if the Trustee or creditors ask you unexpected questions.

DO consider alternatives to bankruptcy. If you can pay your debts, there may be other things you can do. There are credit consultants and debt consolidators who may be able to help you get through this rough time in your life.

DO give your attorney EVERYthing in your relevant financial files, again even if it is embarrassing or incriminating. If you have the document, the odds are someone else does too.

THE DON'Ts

DON'T assume that bankruptcy will get rid of all your debts. Some tax liabilities are nondischargeable (basically, all tax liability accrued in the three tax years prior to filing are non-dischargeable in most circumstances). Student loans are now nondischargeable except in cases of extreme hardship.

DON'T talk to your creditors directly after you have filed for bankruptcy. Tell them to talk directly to your attorney. If you receive mail from them, forward it to your attorney immediately.

DON'T forget to consider saving some of your credit cards. If any of your credit cards have zero balances, you may be able to keep them. Some card providers may ask you to reaffirm your debt in return for keeping a card, and this is worth considering, especially if there is a small balance. Life can be a lot harder without a credit card.

DON'T keep a creditor off your petition for any reason. If you intend to pay them back, you can anyway.

DON'T run up a lot of bills immediately before you file. If you max out your credit cards or take out a loan before you file, the court could find your petition to be fraudulent and dismiss it, or except those debts from discharge.

DON'T unnecessarily spread the news that you have filed for bankruptcy. It is your business, and unfortunately there is still a stigma attached to bankruptcy. Your friends, and your employers, don't have any right to know that you are in financial trouble.