Pre-Bankruptcy Planning

It may be a wise idea to pre-plan if you are considering bankruptcy. There are some essential actions that you need to avoid before and after the filing, which may have a considerable impact on the outcome.

If you un-knowingly or intentionally tried to hide assets or otherwise keep assets from being considered in your bankruptcy, you may have your case dismissed or even face criminal charges. The trustee will evaluate your assets and transactions in the previous two years before filing bankruptcy. If the court finds that you illegally distributed your assets, they may use a law called “clawback” to retrieve the property and include it with your assets.

Don’t hide your property

Many bankruptcy petitioners try to trick the trustee by offering the property to their family or friend to keep it out of the bankruptcy estate. However, this is a dangerous idea. Once you are in the filing process, you take an oath that all the information you gave is fully and honestly correct. Therefore, transferring assets in a fraudulent way may affect your case, but you will face criminal charges, which makes this path not worth the risk of defrauding the court.

Using home equity loans or retirement accounts to pay off debt

Choosing home equity loans or even retirement accounts to pay back your debts is usually not a good option. Taking home equity loans may aggravate the situation. There is a possibility of losing your home just because you can no longer afford to make payments on the home equity loan.

As to your retirement accounts, it can be considered an “exempt” or sheltered property in which creditors cannot attach their rights against, which makes this way not worthy.

It is advisable to consult a McAllen bankruptcy attorney to discuss every available scenario to get a fresh start.