Don’t Make These Mistakes Before Filing for Bankruptcy

We want to set you up for success so that your bankruptcy case runs smoothly from start to finish. Therefore, we want you to know that there are certain “no-no’s” that you must be aware of before you file for bankruptcy.

There are some common mistakes that people have made in the past before filing for bankruptcy. These mistakes have messed up their cases, and these people did not get the results that they had hoped to get. We most certainly don’t want this to happen to you. We want you to easily obtain your discharge without any unexpected problems. We want you to have a happy bankruptcy, so that you can wipe out your bills, keep your property, honorably obtain your legal discharge, and move forward on the road towards a much brighter financial future.

Therefore, please be aware of the following important information:

  1. Don’t Run Up Your Credit Card Debt Before Bankruptcy
    • Once you have made a decision to file for bankruptcy, stop using your credit cards. The law says that consumer debts for luxury goods and services to one creditor of more than $500 within 90 days before you file for bankruptcy might not be wiped out. Therefore, you might have to repay these specific debts even though you file for bankruptcy. Furthermore, cash advances of more than $750 within 70 days before you file for bankruptcy might not be wiped out, and you might have to pay those specific debts even though you have filed for bankruptcy.
    • We don’t want this to happen to you. Therefore, please make sure to let us know of any recent credit card debt, or other debts that you have incurred within the last 90 day period before filing for bankruptcy. We know how to handle these situations, and we will guide you so that we can achieve the best results for you, wipe out your debts, make sure you keep your property, and honorably obtain a legal discharge.
  2. Don’t Repay Debts That You Owe To A Family Member Or Friend Before Filing For Bankruptcy
    • You are not permitted to treat debts that you owe to family and/or friends differently from the way you treat debts that you owe to credit card companies and other unsecured creditors. Believe it or not, the bankruptcy Trustee could ask a family member or friend to return the money that you have repaid them within 1 year of filing for bankruptcy. If you have made any payments on debts that you owe to family members or friends, please let us know and we’ll give you the appropriate advice so that we can get you the best legal results.
  3. It Is Usually Not A Good Idea To Start Withdrawing Money From Your Retirement Accounts
    • When you file for bankruptcy, retirement accounts are usually completely protected. As a simple example, you could have $300,000 in your retirement account, and you might owe $50,000 in credit card debt. If you file a Chapter 7, you could totally wipe out your debt and keep all of the money in your retirement account. Many people have made the mistake of taking money out of their retirement accounts to try to pay their bills before filing for bankruptcy, and this is usually not a good idea.
    • If you have withdrawn any money from your retirement accounts before filing for bankruptcy, please let us know, and we will see what solutions are available.
  4. Don’t Transfer Property Out Of Your Name
    • Sometimes, people who do not fully understand the bankruptcy laws, transfer, sell or give away some of their property. By doing this they hope their creditors would never be able to gain any rights to property they own. The laws are very strict in this area, and the bankruptcy Trustee can actually force the person whom you transferred the property to return the property to the Trustee. The theory behind all of this is that the property could be used to pay back some of your debts. Transfers of property before you file for bankruptcy could be a very bad mistake. Make sure that you tell us about any transfers of property that you have made in the last 4 years before you file for bankruptcy.
  5. Make Sure To Tell Us The Truth About Everything, And Make Full And Complete Disclosure
    • We will go through a series of questions with you concerning your income, your expenses, and all property that you own. You will be signing documents under penalty of perjury. Make sure that the information you provide in your bankruptcy papers is totally true and correct. You will be going to a meeting with us and the bankruptcy Trustee, and you will be sworn in, under penalty of perjury, to truthfully answer all questions. You are going to be asked about your income, your assets, your expenses, your bills, and about any property transfers you have made before filing for bankruptcy. You need to be totally truthful with us in answering these questions, so that we can properly prepare your case and give you the best possible legal advice.
    • Once we know all of the information, we might advise you that bankruptcy is not the best solution for you, and we will advise you about other solutions that might work out better for you. We can only give you the best advice if we know the truth about everything. If you don’t truthfully disclose all information, the Bankruptcy Court could deny you the right to wipe out your bills, and there could be other serious penalties and consequences. Obviously, we don’t want that to happen to any of our clients, so make sure that you always give us complete, accurate, and totally truthful information. When it comes to filing bankruptcy, total and complete honesty is definitely the best policy.

IS BANKRUPTCY SCRIPTURAL?

Copyrighted article reprinted with permission from the internet

Authors: Matthew B. Tozer and Ben E. Lofstedt

What does the Bible say?

Many Christians feel guilty about seeking to file for bankruptcy protection. They feel guilty because they ran up large debts on their credit cards and now are unable to pay back the money to their creditors. Some Christians feel bad that their creditors will not be paid. Others have heard that the Bible condemns bankruptcy. Yet before we begin, it is important for us to define what is meant by the term “bankruptcy;” then, we can critically examine what the Bible tells us.

In the United States of America, our founding fathers recognized the importance of bankruptcy. In the U.S. Constitution, they provided our government with the right to make bankruptcy laws. The bankruptcy laws and procedures we have today, instituted by our federal government, provide relief for overburdened debtors. Persons/entities who are over-their-head in debt can get a fresh start. Normally, a bankruptcy will discharge the debtor’s obligation to repay some or all debt.

Bankruptcy contemplates the “forgiveness” of debt. The Bible likewise contains debt forgiveness laws. Under U.S. law, a debtor may only receive discharge of debts in a Chapter 7 bankruptcy once every eight (8) years. Under Biblical law, the release of debts came at the end of seven (7) years.

“At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the LORD’s release” (Deuteronomy 15:1-2).

The Bible refers to debt as a type of bondage: “… the borrower is a slave to the lender” (Proverbs 22:7).  Thus, the debtor is a slave to the creditor. Interestingly the Bible declares at the end of the sixth year:

               “… in the seventh year you shall let [your Hebrew slave] go free from you. And when you send him away free from you, you shall not let him go away empty-handed; but you shall supply him liberally from your flock…” (Deuteronomy 15:12-14).

Modern bankruptcy laws, like the Biblical provision above, allow debtors to keep certain property when they file bankruptcy. This gives the debtor a fresh start and discourages debtors from going into debt-bondage again, after the bankruptcy is over, in order to survive.

Jesus taught us that sin is a type of spiritual debt. Jesus also taught us to ask God to “forgive us our debts [sins] as we forgive our debtors [those who sin against us]” (Matthew 6:12 Luke 11:4).  Sin creates a spiritual debt. Borrowing produces a financial debt. Regarding our spiritual debt, the law of justice declares: “the wages of sin is death [separation from God]” (Romans 6:23a).  However, the law of grace and mercy states “the gift of God is eternal life in Jesus Christ our Lord” (Romans 6:232b). Jesus paid for our debt of sin on the cross, a debt too big for us to pay.

Likewise, economically, the law of justice states that if you agree to borrow money and repay the debt, you must pay back such debt. The law of mercy, on the other hand, states that if you cannot pay back the debt, you may, through bankruptcy, obtain forgiveness for your obligation.

As with any act of mercy, someone must bear the cost or the burden, just as Jesus did in dying for our sins. With bankruptcy, the creditor and ultimately the consumer must, in mercy, bear the burden of the unpaid debt, but God said He will bless us for such act of forgiveness and mercy (Deuteronomy 15:5, 10, 18).

Jesus, in two (2) parables, used the illustration of forgiveness of a financial debt to teach about God’s forgiveness and the requirement that mankind forgive (see Matthew 18:21-35 and Luke 7:36-50). “And when they had nothing with which to repay, he freely forgave them both” (Luke 7:42). On a spiritual level, by the grace and mercy of God, Jesus gave us a “fresh start” by cancelling all our “sin” debts through His suffering and death on the cross. On an economic level, our nation will graciously help  overburdened debtors, if necessary, by giving them a fresh start economically.

A guiding principal of U.S. bankruptcy law requires persons who file for bankruptcy to have “clean hands.” Accordingly, a debtor may not be freed from debts involving fraud, drunk driving, and deliberate wrongdoing. Moreover, bankruptcy law does not allow the discharge of child support and alimony debts. Further, most student loans, taxes (Romans 13:1,4,7)  and secured loans are not forgiven in bankruptcy. Through these restrictions, bankruptcy laws seek to balance justice and equity (Proverbs 1:3).

As with most biblical principals, there is a balance. If you can repay your debts, you must. If you cannot, then you should determine how God would have you freed from the bondage of debt. Our modern bankruptcy laws were derived from the Bible (Deuteronomy 15:1-2).  Further, the Bible describes financial miracles (2 Kinds 4:1-7). Ultimately, you must seek wisdom and guidance from God  as to the direction He would have you choose. God promises to give such wisdom to those who ask with a trusting heart (James 1:5-7; Proverbs 3:5-6).  Further, the Bible admonishes us to seek Godly counsel (Psalms 1:1; Proverbs 12:15, 11:14, 15:22).

If you have mismanaged your finances, confess your failings to God now. You can receive, by faith, His forgiveness and cleansing (1 John 1:9).  Remember, there is no condemnation or guilt to those who are in Christ Jesus (Romans 8:1). Jesus, by His love and mercy, gave us a fresh start, a new birth. Bankruptcy, based on the law of mercy with divine origins, if necessary, may provide you with a fresh start – a new and brighter economic outlook.

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