5 Tips On What Not To Do When Considering Bankruptcy 


Bankruptcy can be confusing, even for those who are knowledgeable about finances and the law. Many misconceptions exist as to what to do, what not to do, and what to expect.

Filers must be aware of the traps to avoid and actions not to take when considering or filing for bankruptcy.

1. Transferring Assets Will Not Protect Them

Many people follow the false idea that if they transfer their assets, including homes, vehicles or cash to others, then those assets will be protected from bankruptcy.

This idea could not be any further from the truth. In fact, transferring assets does not protect them from the reach of the bankruptcy court.

If the court sees that a filer tried to sell or transfer assets near the time they filed for bankruptcy, this action could be seen as trying to conceal assets or to defraud the court.

2. Continuing to Use Credit Cards

If a person is considering bankruptcy, they should stop using credit cards to pay for day-to-day purchases. In fact, if the someone is facing financial distress, one of the first steps they can take is to stop using credit cards immediately.

Do not make any extraneous or unnecessary purchases, and if purchases are needed for essentials use a debit card that is directly tied to a bank account.

Avoid taking out cash advances against a credit card to pay for expenses. The court could prevent the person from receiving a discharge of that amount advanced.

3. Paying Off Select Creditors

Some people mistakenly believe that they should pay off certain debts to improve their chances of obtaining credit after a bankruptcy. Or, they may select a certain creditor to pay prior to filing for bankruptcy.

This is called a preferential transfer. A preferential transfer results when one creditor receives payment but other creditors receive nothing. The bankruptcy trustee may then file a lawsuit to get that money back so that it can be distributed equally among all creditors.

4. Future Payments Are Not Off Limits

One fact that many may not realize is that some future payments could be considered part of the bankruptcy estate. A bankruptcy estate does not just include money in the person’s bank account when the case is filed.

If the filer is expecting funds to come in, such as tax refunds or an inheritance, that money may have to be turned over to the Trustee to pay off the debts.

Do not conceal any assets and make sure the Trustee is aware of all assets when filing your case.

5. Be Aware of the “Look-Back” Period

Some filers may try to take some of the above actions before filing for bankruptcy under the assumption that the Court or Trustee will never find out.

However, proper evaluation of your case by the Court will take into account transactions within a certain specified period of time. If a filer wants to take an action to pay off debt, it may be advisable to delay filing for bankruptcy until that “look-back” period is cleared.

An experienced attorney can give advice in this situation and how to avoid falling into that trap.


An experienced Texas bankruptcy lawyer can help you carefully file a bankruptcy case and can help analyze your recent financial transactions. Call the Law Office of Marilyn D. Garner TODAY at 817.381.9292 for a free consultation to discuss how bankruptcy may help you.

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