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What Not to Do When Filing For Bankruptcy In CA

Young man tipping money from piggy bank at table

Bankruptcy is a complex, often overwhelming process. It’s also rife with pitfalls for the unwary. People get bad advice from friends and family about how to protect their assets, which only leads to more debt and more difficulties. Below, we discuss some of the common mistakes we’ve seen debtors make when filing for bankruptcy. If you are considering bankruptcy in California, call a knowledgeable Ventura debt relief and bankruptcy attorney for advice and assistance.

Don’t Lie About Your Assets

When you file for bankruptcy, you have to disclose all assets and sources of income. Your income and assets affect which form of bankruptcy you qualify for as well as how your bankruptcy will proceed. In a Chapter 7 bankruptcy, the trustee may collect certain (non-exempt) assets for sale in order to pay back as much of your covered debts as possible prior to discharge.

Lying about your assets in order to protect them is a very bad idea. Your case might be dismissed, you’ll lose out on your chance to get your debt discharged, and you might lose the chance to file based on those debts ever again. Moreover, you may be charged with bankruptcy fraud; if you attempt to defraud a number of creditors, you could face criminal prosecution.

Don’t Give Away Assets

Many people try to give away treasured assets such as cars, jewelry, electronics, and cash to family and friends in order to keep those assets away from the bankruptcy trustee. The idea is that the friend or family member will give the assets back later, after the bankruptcy proceeding. This does not work. If the court and bankruptcy trustee identify assets you recently gave away, they will still be treated as your assets, and they will be even more likely to be liquidated as part of your bankruptcy proceeding.

Moreover, if you expect to get those assets back, then giving away property may actually look more like concealing assets from the bankruptcy proceeding. Concealing assets, as discussed above, may cause you to lose out on your chance to file for bankruptcy, and may open you up to criminal liability.

Don’t Take on New Debt

Bankruptcy is a means to find financial relief by either discharging all covered debts (Chapter 7) or grouping debts into a more manageable repayment plan (Chapter 13). If you are in the midst of bankruptcy, especially a Chapter 7 bankruptcy, you should not be voluntarily incurring new debts. Don’t take out a loan to buy a house or new car, and don’t take out a personal loan for some other venture. Consult with your credit counselors about what you can do with the finances you have, and make moves toward financial freedom.

Don’t Break Into Your 401(k)

Retirement plans and accounts such as IRAs, Roth IRAs, and 401(k) plans are exempt from bankruptcy proceedings. That means that the bankruptcy trustee and your creditors cannot touch those funds. Use that to your advantage. It may be tempting to try to use retirement funds to pay at least some of your creditors off during your bankruptcy, but it does more harm than good. The bankruptcy code and your trustee will determine which creditors get what portion of the cash they can gather during the proceedings; once you file for bankruptcy, picking creditors is not up to you. Let the bankruptcy process help you get out from under debt for now, and save your retirement funds for retirement.

Don’t Go it Alone Without a Lawyer

Bankruptcy law is incredibly complex, and the proceedings can be opaque and overwhelming. A bankruptcy lawyer can help you through the process, making sure that you follow all processes and procedures appropriately. Your lawyer will ensure that you gather all appropriate paperwork, fill out the correct forms fully, and avoid any pitfalls that can limit your discharge or open you up to unnecessary liability. Moreover, a savvy bankruptcy attorney will know all of the subtleties, exemptions, and special rules which will allow you to protect more of your treasured assets and discharge more of your covered debts.

Your attorney can help you protect your house, your car, and other important assets while making sure that all possible debts are covered by your bankruptcy. Your bankruptcy lawyer has been there before; let them help you get the most out of your bankruptcy.

Start Your Journey Toward Financial Freedom With Help From a Dedicated Southern California Debt Relief Attorney

If you are dealing with mounting debt and considering debt relief options including bankruptcy, please contact Rounds & Sutter for a free, confidential consultation. With offices in Ventura, Santa Barbara and Westlake Village, we represent clients throughout Southern California, offering tried & true legal counsel in the face of life’s challenges.

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