Three Common Bankruptcy Mistakes to Avoid
Bankruptcy can be complicated. Many people are fearful just thinking about filing for bankruptcy. However, it is important not to let this concern lead you into mistakes. Here is a short list of common mistakes people make, so that you can avoid them.
A. Don’t transfer things or money.
Do not transfer things you own to a friend or relative -- such as a car, boat, or cash. Many times you can protect the items you own; if you transfer them you may forfeit that protection.
B. Don’t pay off creditors.
Don't pay back relatives or friends amounts you owe them. The trustee will ask, and the person you pay likely cannot keep the money. Don't pay unrelated unsecured creditors as much as $600 within the 90 days before you file. Doing so typically creates what is called a “preference” and the trustee can recover that amount from the payee but you do not get the money back yourself.
Don't pay back relatives or friends amounts you owe them. The trustee will ask, and the person you pay likely cannot keep the money. Don't pay unrelated unsecured creditors as much as $600 within the 90 days before you file. Doing so typically creates what is called a “preference” and the trustee can recover that amount from the payee but you do not get the money back yourself.
C. Don't borrow against your 401(k). The funds in your 401(k) account are virtually guaranteed to be protected from creditors; if you take the money out, you may forfeit that protection.
