Seven Personal Bankruptcy Tips BEFORE Bankruptcy in Boston
We recommend that folks in Massachusetts meet with us BEFORE making decisions regarding assets whenever personal bankruptcy is a possibility; even if it is only a remote possibility. This is because with decades of experience in personal bankruptcy we see a theme with respect to mistakes our clients have made.
First, be very careful before transferring real estate. Selling your house is one thing. Transferring ownership to your spouse or child may be a good idea for many reasons. However, it also may be considered a fraudulent conveyance in a number of instances. The federal bankruptcy Trustee that reviews your Personal Bankruptcy Petition and Schedules always asks about real estate transfers. The Registry of Deeds records are public and your testimony is under oath. It is one of the easiest frauds to catch. And, it’s almost always unnecessary: your can exempt your home under both federal and state laws in personal bankruptcy.
Second, be just as careful before transferring credit card balances. We have many clients who, for years, were transferring their credit card balances from one creditor to another, lower interest rate creditor. If the transfer is made within 60 days of the bankruptcy filing, it will be “presumed” to be fraudulent. This too is unnecessary because your can most likely discharge the debt to the first creditor, no matter what the interest rate and accumulation after you stop paying.
Third, paying Peter to the detriment of Paula. The simple rule is you can’t make preferential payments to one creditor over another, immediately before filing for bankruptcy. This comes up especially when monies are owed to a family member. The federal Bankruptcy Trustee will disallow the payment, seek the moneys back, and distribute them to proportionally to the other creditors. Thus, it is far better to list your relative as a creditor, discharge the debt, and, if you continue to feel obligated, pay your relative after the bankruptcy.
Fourth, failing to report debt to your attorney for listing on a personal bankruptcy petition. This comes up usually when a client feels guilty or just doesn’t want that creditor to get a notice of the bankruptcy and the discharge. Too bad. This is fraud on the court and you can’t do it.
Fifth, filing a personal bankruptcy when you are expecting a small windfall. Be it a tax refund, an inheritance, or the lottery, you and your attorney can plan out when you file for the bankruptcy so that you can legitimately get your monies and file the bankruptcy at the appropriate time.
Sixth, be careful with withdrawals from 401k’s, IRA’s and other retirement accounts. These monies are generally protected in bankruptcy. They are exempt. If you make a withdrawal, you may be exposing exempt monies to the Trustee unnecessarily.
Seven, not consulting with an attorney when you first get into trouble. This could cost you far, far more than the cost of the attorney. We often get clients who have paid thousands of dollars to debt collection agencies and specific creditors when they knew, or should have known, that a personal bankruptcy was coming. The bankruptcy discharges all the debt. Thus, seeing a bankruptcy lawyer sooner can save you money…sooner!