DOs and DON’Ts of Bankruptcy

DO remember you are not alone.  Over a million bankruptcy cases were filed in the last 12 months.  Those debtors like you are not trying to “work the system” – they, just like you, want to breathe again and enjoy the day, instead of worrying about debt and creditor calls.  The bankruptcy attorneys at Walden & Pfannenstiel will be with you every step of the way.

DO be entirely honest with your bankruptcy attorney. She can only represent you effectively (and ethically) if she knows all of the facts.  Bankruptcy cases are filed in Federal court.  Penalties for fraud can include a denial of discharge, criminal sanctions, and the loss of the right to claim exemptions.  This is not to scare honest debtors from filing bankruptcy.  Honesty and cooperation with the Trustee will avoid claims of fraud in your bankruptcy case.

DO list all of your creditors in your schedules, even those which you intend to pay back (such as friends/family) and those you must pay (such as taxes or child support).

DO complete the Bankruptcy Client Worksheet to the best of your ability. Your bankruptcy attorney is charging you a reasonable, flat fee based on the assumption that you will provide her with all the financial information needed and that she will not have to ask for it.

DO continue making your regular monthly payments on your mortgage, car loan, etc. (assuming you wish to keep the collateral). Be aware that some secured creditors (especially car lenders) might stop sending you a monthly statement; this does not excuse you from remembering to timely make the monthly payment.

DO adjust your tax withholdings.  Tax refunds are part of the Bankruptcy Estate and can be requested by the Trustee if the refund is received before filing your Chapter 7 bankruptcy and is still in your possession at the time of filing.  Refunds can also be lost if received after filing.  Tax refunds can be requested by the Trustee during the course of the repayment plan in a Chapter 13 bankruptcy.  Do not adjust to the point of owing a large refund.  Contact our bankruptcy lawyers on how to properly spend-down a tax refund before filing.

DO file your taxes.  Current, accurate tax returns will need to be provided to the Trustee in your bankruptcy case. 

DO call our office if a creditor continues to contact you after your bankruptcy case is filed.

DO ask questions until you feel comfortable that you understand the answers which your bankruptcy lawyer is providing you. 

               THERE IS NO SUCH THING AS A STUPID QUESTION!

DON'T feel bad about considering bankruptcy as an option -- sometimes life just happens.  Often you are able to function better after the stress of debt is lifted from the household.

DON'T continue to use your credit cards if planning to file for bankruptcy in the near future.  Credit card purchases exceeding $500 within 90 days of filing may result in a non-dischargeable debt.

DON’T take out cash advances from credit cards.  Cash advances exceeding $750 within 70 days of filing a bankruptcy case may result in a non-dischargeable debt.

DON’T pay off a creditor immediately before filing your bankruptcy, unless you have cleared it with your bankruptcy attorney in advance.  This includes payments to friends and family.  A payment over $600 to a relative or business associate within a year before filing your bankruptcy case can create a preference.  A payment over $600 to an unsecured creditor within 90 days before filing your bankruptcy case can create a preference.  Review the Chapter 7 and Chapter 13 Bankruptcy Timelines.

DON’T ignore requests for documents from the Trustee appointed to your bankruptcy case; he can have your discharge denied for lack of cooperation.

DON’T sell, transfer, or give away any of your property prior to or during your bankruptcy without first discussing it with your bankruptcy attorney.

DON’T continue paying your dischargeable, unsecured debts (such as credit cards) after you have decided you are filing bankruptcy, but before you file. You are just throwing money away. Learn to deal with the telephone calls... or refer the creditors to your bankruptcy lawyer.

DON’T forget to list any of your creditors, their collection agents or attorneys. People who are not listed will not receive notice from the bankruptcy court and will continue contacting you.

DON’T hide any information from your bankruptcy attorney or the Trustee appointed to your bankruptcy case. This especially applies to non-disclosure of debts to family members or friends or payments made to these “insiders” in the time prior to filing bankruptcy. 

DON’T borrow or withdraw funds from retirement accounts such as 401k, IRAs, or other accounts to pay-off debt until you speak with a bankruptcy lawyer to determine if bankruptcy is necessary. 

DON’T refinance your home, take out a home equity loan, or reverse mortgage until you speak with a bankruptcy attorney to determine if bankruptcy will still be necessary.

DON’T incur any debt in anticipation of filing for bankruptcy.