If you have serious debt and feel that bankruptcy may be in your future, be aware of the following:
1. You should avoid borrowing money or withdrawing money from your IRA, 401k or ERISA qualified retirement plans to pay the debt. These funds should be safe in a bankruptcy case.
2. Don’t borrow money on your home’s equity to pay your bills.
3. If you owe friends, family, or business associates money, don’t pay them back within one year before you file (unless less than 600.00). This is considered a “preference” and the money can be recovered from those close to you for distribution to all of your creditors in the bankruptcy case.
4. Don’t put property into someone else’s name or give an asset away. This type of transfer could be considered fraudulent and cause you to lose the discharge and the asset.
5. If you typically get a large tax refund, think about increasing net income monthly in order to get a smaller refund. It will be property of the bankruptcy estate. If the refund is the result of an earned income tax credit, you may be able to request that it be paid in your paycheck.
6. Don’t reduce the withholding so much that you end up with a large tax bill either.
7. Continue to make payment on cars and real estate you need to keep.
8. Lastly, get good advice from an experienced bankruptcy attorney sooner rather than later. The longer you wait to get advice, the narrower your choices will be.
