Filing for chapter 7 bankruptcy requires several things, one of which is a good Texas bankruptcy attorney to guide you through the process. But, even when you have someone lined up, it’s a good idea to know which pitfalls to keep away from while you’re planning your next moves. Here are some common traps that unwary people may become victim to when planning for bankruptcy:
- Deposits. Make sure that there won’t be any deposits into banks that you currently owe money to. This includes checking accounts, savings, and CDs. Once you file for chapter 7 bankruptcy, the bank has the right to freeze the account, thus preventing access to any money that has been deposited into the accounts. That means all the money you planned to use to pay bills will be gone forever, and it isn’t coming back. Also be sure to move any automatic payments and automatic payroll deposits to another account to make sure all the bills are paid, and you get the money you are owed for working.
- Not Waiting Long Enough. Let’s say you made some mortgage payments that were late, right before filing for chapter 7 bankruptcy. If you don’t wait the 91 days after that check clears, the trustee may have the right to take that money back from the mortgage company. Then, you would be bankrupt and still owing those payments. A good bankruptcy lawyer will be sure to ask what payments you’ve made on debts in the last 91 days and may ask you to wait before filing for chapter 7 bankruptcy.
- Cashing in a 401(k) or IRA. This is a common issue, because people assume that they can use the money to take care of some of the debt before filing for chapter 7 bankruptcy or to use for spending. This is generally seen as a bad idea because once it’s cashed out, the creditors have access to that money. While it is still an investment, they cannot take it from you no matter what happens. So, the best plan of action is to talk to a bankruptcy attorney and just hold on the investment until later.