Thinking About Filing For Bankruptcy? 3 Things You Shouldn't Do

Posted on: 3 June 2018

If you are thinking about filing for bankruptcy, your actions are going to be carefully examined and scrutinized by the courts. The type of debt that you have, how you accumulated that debt, and why you have that debt will be examined. That is why you need to be careful about your actions in the months leading up to filing for bankruptcy.

Don't Pay Off Any Creditors

It may feel like the opposite of what you should do, but if you think that you want to file for bankruptcy, you should not pay off one of your creditors. That is a great strategy when you are trying to reduce your overall debt and become debt-free; however, paying off one creditor over other creditors is not a good strategy when you are filing for bankruptcy. Paying off one creditor over others can look like you are favoring one debt over another, and if the payment was recent, the courts may actually have that creditor give back the funds so that the money can be split more equitably between creditors.

Don't Make Any New Debt

Next, you should not run up any new debt if you are thinking about filing for bankruptcy. That means you should not apply for any new loans or credit cards. You should also not max out any of your credit cards.

If you have a credit card that you regularly use and pay off, it is okay to keep using it in that manner. The bankruptcy court is going to be looking for behavior that is different than what you have been doing before.

Running up new debt will look like you are taking advantage of bankruptcy proceedings, and could cause you to get your entire case thrown out.

Don't Touch Your Retirement Funds

Finally, do not touch your retirement funds to pay off any debt. Bankruptcy courts want to help you settle your debt and make smarter financial decisions moving forward; they do not want to take away your ability to take care of yourself in the future.

Retirement funds such as IRA, 401(k), and 403(b) plans are just some of the retirement plans that are protected during bankruptcy proceedings. That means that the money in your retirement accounts will not be used to help settle your debt.

If you are thinking about filing for bankruptcy, you need to be careful about the financial choices that you make. Don't pay off any creditors, and keep making consistent payments to all of your creditors. Avoid creating new debt and don't touch your retirement funds; remember they are protected. For more information you can contact professionals like Charles J Schneider PC