Five Mistakes To Avoid

1. Repaying friends, family members or business associates prior to filing bankruptcy

Any payments to these individuals within one of the filing of Bankruptcy could allow these monies to be considered preferential payments and can be recovered by a Chapter 7 Trustee. In a Chapter 13 case, the trustee may choose to not attempt to recover the monies but instead allow a person to pay in as part of the Chapter 13 plan those monies that he could have recovered.

2. Large amounts of credit usage prior to the filing of a bankruptcy

You don’t want to go out on a spending spree and make a lot of new charges for significant purchases prior to the filing of the Bankruptcy. If you do, you may be required to pay back this type of purchase if the creditor objects to the discharge of the debt. If you are planning on filing bankruptcy in the near future, don’t make the mistake and going out and building up large new purchases on your credit cards prior to filing.

3. Transferring assets out of your name prior to filing for bankruptcy

Some people who have debt problems believe that if they transfer a house or other asset into someone else’s name that no one can go after the asset. Intentionally transferring valuable assets out of your name and not getting paid the fair market value can be considered a fraudulent transfer which can be undone by the Bankruptcy Court. In addition without transferred the asset, you may have been able to exempted in the Bankruptcy the asset from any creditors.

4. Cashing in a retirement account or taking out loans from your retirement and 401(K) account to pay off creditors

Most Retirement accounts are exempt and cannot be touched by creditors. These are monies that are set aside for your retirement. Many individuals use up all of their retirement monies to trying to pay off their debts and then still need to file for Bankruptcy since the bills have not been paid off in full. In addition, taxes are owed on a distribution from a retirement account that is not repaid.

5. Delaying getting legal help

Many of these mistakes are avoidable by having a consultation with an experienced Philadelphia bankruptcy attorney. Seek legal advice as soon as possible when you realize that you have a debt problem. There is nothing wrong with Asset Protection Planning. The earlier you act, the better off you are in long term.