3 mistakes too many people make before filing for bankruptcy
On Behalf of O’Brien Law Firm, LLC
Posted on: August 27, 2019
Many people will end up filing for bankruptcy before the end of 2019, and research suggests many of those will come from the South. Mississippi has one of the highest divorce rates in the country, with 4.25 bankruptcies occurring for every 10,000 residents, compared to the national average of 2.5 for every 10,000.
Bankruptcy can help you get your finances back on track in the long run, but there is no guarantee a court will approve your bankruptcy in the first place. You have to set yourself up for success, and that requires ensuring you avoid these common mistakes too many Mississippi residents make right before filing.
1. Paying friends or family members
You may think you will do the right thing by paying back loved ones who loaned you money in the past. However, this looks incredibly suspicious to judges. It comes across like you want to conceal certain assets by giving them to other people. While it is a noble thought, you should delay paying back people until the court approves your bankruptcy filing.
2. Taking money out of your 401(k)
You may think it is a good idea to take funds out of your retirement accounts to pay off some creditors before filing. There are two reasons why you should avoid this. First, the bankruptcy code forbids favoring one creditor over another. Additionally, your retirement accounts are exempt from bankruptcy proceedings. Therefore, you do not have to worry about losing any funds in these accounts when you file.
3. Running up credit card debt
When bankruptcy is on the horizon, many people do not see the harm in making some extravagant purchases on their credit cards. For the most part, you cannot discharge debt racked up in the previous 90 days before filing. Therefore, you will still owe the money once the bankruptcy is over. Additionally, creditors can contest such purchases, and it could jeopardize your ability to get a bankruptcy in the first place.