Why Failing To Plan Is Planning To Fail In Bankruptcy Court

26 Oct Why Failing To Plan Is Planning To Fail In Bankruptcy Court

If you are considering filing abankruptcy petition you should consult with an experienced lawyer so you can do some planning. But you should be careful; as with most of life, good planningwill save you money but sloppy planning can land you in hot water.

I often talk with people who are considering bankruptcy who have already tried to do some planning on their own. They sold their car to a friend for ten dollars, or quit claimed their property to their spouse thinking that was the only way to protect it. Sometimes theyused their tax refund to pay off a loan from a relative, or “settled” a debt with one creditor. Other times they borrowed from their retirement or took out a home equity loan to try to forestall the inevitability of having to file.

These are things you should NOT do before filing.

A transfer for less than value is a “fraudulent conveyance” and can be reversed by a bankruptcy trustee for up to six years in New York. Paying a debt before filing bankruptcy, especially to a relative, is a preference, and can be taken back by a trustee. Tapping into retirement savings or home equity is needlessly depleting an asset that would have been protected in a bankruptcy.

Before filing for bankruptcy you should speak with your attorney about maximizing your exemptions. You should discuss the best use of your funds, including thepotential benefitsof not paying your creditors prior to filing.

Sometimes you and your attorney need to discuss the timing of your bankruptcy filing. If you have a potential “fraudulent conveyance” issue, you may want to transfer the property back into your name beforeyou file. There may even be times when it makes sense to move to another state before filing.

You can see why it is so important to consult with a knowledgeable and experienced bankruptcy attorney before you file. Properplanning can make the entire process go smoother and leave you in better financial health at the end. You should also take the opportunity to speak with yourlawyer about planning for after your bankruptcy.

Image credit: ZeRo`SKiLL

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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