If you’ve found yourself in a tough financial situation due to loss of income, a heap of medical bills or a divorce, filing for bankruptcy might be the best solution for your problem. If you cannot pay the creditors the money you owe them it might be the only viable solution. There are a lot of myths surrounding filing for bankruptcy that deter honest Americans from the idea. The reality, however, is that benefits of filing for bankruptcy far outweigh any concerns. You can find more about the topic at this link: http://www.thebklawyers.com/filing-for-bankruptcy-in-california-benefits/
However, if you are serious about filing for bankruptcy, you have to be very careful how you plan your finances. There are some moves that could seriously damage your case. In order to ensure a smooth bankruptcy process not riddled with challenges from the creditors or the trustee, you have to pay attention not to make the following mistakes:
Do Not Use Your Credit Cards
According to CreditCards.com, 7 out of 10 Americans own at least one credit card, while most of them have more than 2 on average. The first thing you should do is stop using your credit cards right away when you notice your current financial situation may result in bankruptcy. Stay away from shopping, buying clothes, electronics or other things you can live without. You should also stay away from cash advances from your credit card. However, you can use your debit card linked to your bank account for your other needs.
Transferring Funds or Property
In an attempt to shield their funds, assets or estate from the bankruptcy proceedings, people often transfer cash, vehicles or homes to their family members or friends they trust. In fact, this does little to protect these assets. Even worse, this the bankruptcy court can interpret this as a fraudulent act of hiding assets, which is punishable in itself even though it might not have been your intention.
Remember that owning assets does not prevent you from filing for bankruptcy and that filing for bankruptcy does not necessarily mean you will lose those assets. In fact, most people are allowed to keep their personal assets, so this move can only harm your case.
Paying Off Some of the Creditors
Another common misconception is that you have better chances of winning your bankruptcy case if you pay off some of your creditors before filing. However, this move could also ruin your case. These payments are referred to as preferential transfers and mean that a single creditor has received payment prior to other creditors with the same weight.
This can result in the bankruptcy trustee suing the creditor to reclaim the money you paid so it can be distributed evenly among all the creditors. This, in turn, will significantly delay your case until the issue is resolved.
Depositing Extra Funds into Your Account
The only funds that should be deposited into your bank account are the ones coming from your source of income. Never use your bank account to deposit a check for a friend or someone else’s money you’re just keeping safe. Also, don’t accept checks or deposits from friends or relatives trying to help you out.
Mind Your Future Payments
Once you file for bankruptcy, all future payments become a part of your bankruptcy estate including the funds you currently have. That means that your bankruptcy trustee will seize all your future payments and use the money to pay the creditors. These payments include tax returns and any funds you inherit. Even though you might not be able to stop these payments, you should know that they immediately become a source the trustee can tap into to repay the creditors.
If you need to consult a bankruptcy expert in San Diego contact The Bankruptcy Lawyers Chang & Diamond, APC:
9089 Clairemont Mesa Blvd, Suite 110, San Diego CA 92123