3 Things To Do If You Are Planning On Filing For Bankruptcy
If you are planning on filing for bankruptcy, and you are getting together the money to start the legal process, you need to be careful with your finances. Before filing for bankruptcy, you shouldn't try to pay off a large amount of debt, run up new debt, or make any strange transactions.
Don't Make Any Large Payments
If you know that you are planning on filing for bankruptcy, do not make any big payments to any creditors. Continue to pay the same amount to each creditor that you have been paying in the past, or the minimum payment if you have not been making the payment.
However, you should not pay off any of your debts. For example, if you don't owe as much on your credit card compared to a personal loan, you shouldn't pay off that credit card.
Paying off one creditor, while ignoring other creditors, can be seen as preferential treatment. This can result in the money being taken away from the creditor you paid off and distributed among your other creditors.
It is a good strategy to pay off one debt at a time and move onto the next when you are trying to pay off your debt; it is not a good strategy when you know you will be filing for bankruptcy.
Don't Add Any More Debt
When you know you are going to file for bankruptcy, you do not want to add any new debt to your plate. Do not try to take on any more debts. That means you should not apply for a new credit card or apply for a new loan.
If you do that when you are already clearly in debt and can't afford to take on any more money, you could end up facing fraud charges and be left with that debt after your bankruptcy proceeding wrap up.
Avoid Strange Transactions
Finally, make sure that you are not making any strange transactions. You should follow your regular buying patterns and buy things that you need, such as food and staples for your home. What you should not do is go on a big buying spree or transfer assets to different owners. Keep everything you own in your name and buy what you need, but don't splurge on a lot of extras or try to hide any assets.
Leave Your Retirement Accounts Alone
Finally, do not access the money in your retirement accounts to try to pay off your debt. When you go through bankruptcy, your retirement accounts are generally considered protected. That means that you will not have to use the funds from your retirement to pay off your debts.
For more information about filing for bankruptcy, contact a business such as Downard & Associates.
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