7 Mistakes to Avoid Prior to Filing Bankruptcy

Posted on March 1, 2010 by Christine Wilton

In order for your bankruptcy case to run smoothly through the process, you need to avoid these seven mistakes people make before they file their bankruptcy case. 

  1. Do Not Run Up Your Credit Cards:  Once you've decided to file for bankruptcy because any debt in excess of $500.00 incurred within 90 days of filing for bankruptcy are presumed to be non-dischargeable and you may end up holding the bag on this.  Also, cash advances of more that $750.00 made within 70 days of filing are presumed to be non-dishcargeable and may be found due and owing.
  2. Don't Repay Any Family Members:  You cannot repay your family members any better than you would any other creditor.  In fact, the bankruptcy trustee can reclaim any amount you paid to a family member within one (1) year of filing bankruptcy.
  3. Do Not, I Repeat, DO NOT Cash Out Your Retirement Accounts:  This is one of the biggest financial mistakes you can make EVER.  Retirement accounts are generally exempt from the trustee taking when you file for bankruptcy.  This means that you can usually eliminate your debts and keep whatever you have in an ERISA qualified account. 
  4. Do Not Transfer Any Property Out of Your Name:  You have a duty to disclose all  of your assets to the trustee and your estate essentially belongs to the trustee once you file for bankruptcy.  The trustee can, and in most cases, will undo any such transfers made within two (2) years prior to filing for bankruptcy.
  5. Do Not Try to Reduce Your Home's Equity:  Right now this should not be an issue here in California since most of us have no equity in our homes.  Just keep in mind that there is a homestead exemption and in most cases, you can keep your home and the equity, and still file for bankruptcy.
  6. Do Not Fail to Appear At Court Proceedings:  Until your bankruptcy case is filed with the court, any civil proceedings, or collections case against you will continue and you MUST appear.  Also, you MUST appear at your 341(a) Meeting of Creditors in your bankruptcy case and all other appearances as instructed by your lawyer.
  7. You Must Tell Your Lawyer The Truth:  Your lawyer can only provide advice based upon the information you provide.  If you fail to tell your lawyer about your assets you could lose them, your bankruptcy case could be dismissed, you could be fined, and you could end up in prison for bankruptcy fraud.

So, if you've decided to file for bankruptcy, follow these golden rules.  Don't risk your financial fresh start because you deserve a life free from debts that you cannot afford to pay. 

 

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Filing Personal Bankruptcy: What is the Process?

Posted on January 4, 2010 by Christine Wilton

Once you've decided that filing personal bankruptcy is the right path toward financial freedom from your debts, you need to know: what is the process? How long does the process last? Do filers have to go to court? Who needs to be informed of the bankruptcy filing?

The process of filing bankruptcy requires that you complete a bankruptcy petition and disclose all of your debts and assets to the bankruptcy court.  Before you file for bankruptcy with the court, you will be required to complete a pre-filing credit counseling course and your certificate of completion of that course must be filed with your bankruptcy petition. 

After you've filed your petition with the bankruptcy court, you must attend a meeting of the creditors as required by 11 U.S.C. 341(a); otherwise known as a 341(a) hearing.  This meeting takes place before your court appointed trustee.  The trustee's job is to verify your identity by viewing your government issued identification card [usually a driver's license] and social security card; and the trustee will ask you some basic questions about your petition.  You must also complete a financial management debtor education course in order to be considered for a discharge of your debts. 

For chapter 7 liquidation cases, the process usually lasts approximately six months with a mandatory meeting of the creditors before the trustees.  Chapter 7 debtors will not see the bankruptcy judge, unless they need a reaffirmation hearing.  Chapter 13 individual debt adjustment cases where a debtor repays a portion of their debts over time, requires considerably more time and expense.  The process for a chapter 13 case lasts between three and five years depending upon the household income and the debtor's ability to repay their debts.  

The fact that you've filed for bankruptcy will appear on your credit report for 10 years if you filed Chapter 7 or Chapter 11 and will appear on your credit report for 7 years if you filed Chapter 13.  Bankruptcy may also affect your ability to lease rental property and find employment; and filing bankruptcy will impact your ability to file again in the future.  

Experiencing extreme financial hardship has emotional costs as well.  That's why it's best to talk to a bankruptcy lawyer so that you can make a well informed decision and lead your family to financial freedom from your debts with a trusted advisor who will inform you of all of your legal rights and remedies available through the bankruptcy process.  

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Meet Your Chapter 7 Trustees

Posted on September 28, 2009 by Christine Wilton

The Central District Consumer Bankruptcy Attorneys Association (CDCBAA) hosted, an MCLE program on September 12th called, “The Chapter 7 Trustees.” Southwestern Law School co-sponsored the event and provided the wonderful location. The panel trustees consisted of Jeffrey I. Golden, Amy L. Goldman, David Seror, Diana C. Weil, and Edward Wolkowitz.  The trustees set forth to air their “pet peeves” and reinforced their duties and obligations as set forth in the Handbook for Chapter 7 Trustees.
 

11 U.S.C. Section 341(a), known as the "meeting of creditors" is required and it is mandatory that the debtor appear in person before the trustee at this meeting. “Appearing in person” requires the debtor to bring their current valid driver’s license with any extensions and social security card. The trustee is looking for a substantial deviation from the name(s) reported on the petition and the identity of the person appearing before them. If there is a substantial deviation in the name, an amendment to the petition is a best practice.

In preparing the debtor for their 341(a) meeting, I will provide my clients with the 10 mandatory questions that the trustee must ask and make sure they bring their “current,” “valid” identification forms, a signed copy of their petition and I will bring a copy of their tax return.

As for priority at the section 341(a) meetings, we were advised the following: Even though small children are to be left at home, anyone with small children are likely to be handled expeditiously. One attorney commented that this is a little known priority and parents have been offered as much as five dollars for the use of their children for this priority. Otherwise, represented debtors are given priority at these meetings.

What is important to note is that the goal is to avoid a continuance. Disclosure and explanation is never a problem for the trustees and being helpful by noting any discrepancies is actually refreshing. We must continue to lead by example and assist the trustees in maintaining a respectful and dignified space in the hearing room for the benefit of all debtors.
 

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