Thirty-Six DON’TS when Preparing to File a Bankruptcy Case

Max Gardner is nationally recognized as one of the best bankruptcy lawyers in the United States - so much so that lawyers come from far and wide to attend his Bankruptcy Boot Camps, at which he shares his knowledge with consumer bankruptcy lawyers over an intensive four-day seminar.  He has kindly given attorney Baker permission to share his list (lightly edited) of things NOT to do before filing a bankruptcy case.  Attorney Baker has attended Boot Camp three times!

1.          Don’t leave out any Bank, Brokerage, Credit Union accounts (checking, savings, money market, CD, trust, escrow). 

2.          Don't file if your income is greater than your expenses.  {Attorney Baker's note:  This is true for chapter 7 cases.  If you will be filing chapter 13 in order to cure a mortgage problem, for example, you MUST have more income than expenses.  I can help you with preparing a budget.}

3.          Don’t use your credit cards within 90 days of filing, especially if considering a chapter 7 case.

4.          Don’t take credit card cash advances.

5.          Don’t use convenience checks.

6.          Don’t do any "balance transfers" from one credit card to another.

7.          Don’t pay money to family.

8.          Don’t pay money to friends.

9.          Don’t tell a creditor that you intend to pay.

10.        Don’t leave assets off of your paperwork.

11.        Don’t file if you are about to receive a tax refund, inheritance or settlement (personal injury, worker's compensation, etc.). Discuss the timing with your attorney.

12.        Don’t forget to tell your attorney about your small business, sole proprietorship, partnership, LLC, LLP, LC, corporation, or hobby.

13.        Don’t forget to report child support income.

14.        Don’t purchase a home shortly before filing bankruptcy without consulting your attorney. 

15.        Don’t give or gift property to anyone.

16.        Don’t pay more than $600 on any past due bill.

17.        Don’t transfer property to anyone or to an "entity."

18.        Don’t cash out retirement plans or 401k’s.

19.        Don’t take out a second mortgage.

20.        Don’t gamble.

21.        Don’t hide assets or debts.

22.        Don’t take out “payday loans.”

23.        Don’t put your money in your kids’ bank accounts.

24.        Don’t omit or ‘save’ a credit card for after your bankruptcy.  Filing a bankruptcy case is included in your credit report, so the card is likely to be cancelled anyway.

25.        Don’t fail to list debt to family or other “insiders.”

26.        Don't write bad checks. 

27.        Don’t borrow money.

28.        Don’t forget to tell your attorney about liens you may have on your home or unpaid judgments so they can be avoided.  {Attorney Baker's note: in this case, "avoided" means "removed".  I will check the Registry of Deeds before filing your case, but tell me anyway.  Full disclosure is mandatory!  I may already know about things you aren't telling me!}

29.        Don’t make major financial decisions without talking to your attorney.

30.        Don't get married before filing if your spouse has a high income.

31.        Don’t misrepresent facts to your attorney.

32.        Don’t run up your credit cards in advance of filing bankruptcy.

33.        Don’t fail to appear at State court hearings, trial or proceedings; discuss and coordinate with your attorney.

34.        Don’t hide from your attorney. Keep them up-to-date with your address, phone numbers and e-mail address.

35.        Don't bank where you owe money. Close the account and reestablish it somewhere else. CAUTION: If you have direct deposit(s) or regular withdrawals from the account you are closing, be sure to allow sufficient time to make the changes to the new account if such deposits and/or withdrawals are to continue.

If you are a Social Security debtor, you may have a lag time of a few months because it sometimes takes that long for Social Security to complete the direct deposit change to another account. If you are pressed to file, then clear out the account as soon as the deposit hits the bank. 

This also happens with payday loans. Many of those "lenders" have the debtors sign a form allowing them to withdraw money from the account on a regular basis and these withdrawals are almost impossible to stop.

Other withdrawals from the account on a regular basis may be for insurance (auto, homeowners, life, health), utilities, and memberships (such as YMCA). 

36.        Don't conceal relevant information about your finances from your attorney. Even if you feel the subject matter is sensitive, illegal, or likely to cause problems among family members, friends or colleagues; or you believe there is no way anyone would possibly find out about something so long as you keep it concealed, don’t hide it from your attorney. Disclose all financial information to your attorney and prevent future surprises.  (Attorney Baker's note:  Except in rare or unusual cases, anything you tell your attorney is privileged and cannot be disclosed by the attorney unless a court orders otherwise.)