When it comes to filing for bankruptcy, there are many do’s and don’ts before filing for bankruptcy. First of all, the Bankruptcy Court requires people who file for bankruptcy to be completely honest and forthright in everything they do. Any indiscretion can end in dismissal of the bankruptcy discharge putting the individual back in fair play for creditors. A person should really sit down with a bankruptcy attorney and discuss the do’s and don’ts before filing for bankruptcy to ensure they have a full understanding of what is required of them. When it comes to dealing with the government, it’s more of a do as I say than do as I do situation. Although it is important to be honest with the court, it is sometimes quite difficult to understand this requirement with all the corruption in government agencies. The federal government keeps talking about how transparent they are while at the same time all these scandals keep coming out showing the opposite.
Even though the bankruptcy attorney tells their clients what to do, it seems that many of them just don’t listen and end up getting into some kind of trouble. Someone who files for bankruptcy should stop spending on their credit cards immediately after the decision to file for bankruptcy. As a general rule of thumb, 90 days is a good amount of time, but six months is much better before you file for bankruptcy. The creditor can challenge the bankruptcy filing if he believes the debtor was charging his cards prior to the filing.
One mistake many people make before filing for bankruptcy is borrowing money from their 401(k) or retirement plan to pay off debt. While it is noble to take some of this money to pay some bills, it is foolish to borrow money from your retirement plan that is protected by bankruptcy exemption laws. If the person does not have enough money to fully pay the debts with this type of plan, he could end up filing a Chapter 7 bankruptcy after exhausting his retirement. Then they are left broke and poor without any kind of retirement. Another thing also happens in this situation, the bankruptcy court considers this newfound money as income and taking these funds could make the person ineligible for Chapter 7 bankruptcy. For these people it could be a double whammy against them. They lost their retirement and now they don’t even qualify to file for Chapter 7 bankruptcy when they really need to. If only they had listened to their attorney and not looked into their retirement account.
Another common occurrence occurs when someone files for bankruptcy due to losing a job. Sometimes they will look for work out of state or even have to move in with a distant relative due to lack of funds. When a person files for bankruptcy, he must do so in the state in which he resides. In the past, many people used to move to a state that would benefit them in their bankruptcy filing. They would check all the bankruptcy exemption laws and move to the state that protected the most amount for their individual situation. Now, after changes to the bankruptcy code, a person must reside in the state for six months before filing for bankruptcy to use that state’s bankruptcy exemption laws. He cannot temporarily relocate to benefit from bankruptcy filing.
It is best to consult a bankruptcy attorney when the going gets tough and discuss a possible move with the attorney. Sometimes it is in your best interest to stay where you are until the bankruptcy filing is complete. If someone has to move for work and is in a hurry, don’t worry, you can still file for bankruptcy in the state you’re moving to, but you may not be able to use the bankruptcy exemptions for the state you’re in. moving to They will have to use the federal bankruptcy exemptions or the state exemptions from where they moved.
In today’s economy, we are seeing many people moving across the country in search of work. People sometimes think that the grass is greener on the other side of the fence and believe that they can avoid filing for bankruptcy if they find an opportunity. They only discover that things are just as bad everywhere and bankruptcy is still necessary. The best advice is to discuss the situation with the bankruptcy attorney before making any move.