Mistake #1: Not Telling Your Bankruptcy Attorney About a Credit Card You Want to Keep.
There you are, whether your attorney is asking you in person at their office, or whether it’s on a form she gave you to fill out: List all of your creditors, their addresses, account numbers and how much the debts are. You have one credit card that isn’t “maxed out” and you’ve been making minimum payments on it just to keep it from going into default. You’d like to keep it because you want a little bit of credit, just in case of an emergency.
What you don’t realize is that most creditors, especially the big banks that issue Visa, Master Card, Discover and American Express, check your credit report every few months, if not monthly. Sooner or later, it’s going be obvious that you filed bankruptcy because it will be right there on your credit report.
What do you think your credit card issuer is going to do then? Will they let you keep your card? Will they issue you more credit? Not a chance! Not in this lifetime! What you have done is made things incredibly more difficult for yourself and for your attorney.
What To Do Instead: Disclose, disclose, disclose. When your attorney asks you to list every debt you have, then list every debt you have. There are reasons for every question. Many are asked because they are required. But many more are asked so that your attorney can protect you.
Mistake #2: Not Mentioning You Paid Back Money to a Relative.
Any decent bankruptcy attorney will ask you if you paid back any money that you owed to a family member within the past year or two. Every state is a little bit different. But the idea is that you don’t want to create what is called a “preference”.
In a typical state, if you paid back a parent, a brother or a sister during the past year before your case is filed, you did just that – created a preference. Let’s say you had some credit card debt, some unpaid medical bills and a loan from your family member. That family member is in the same class of creditors as the credit cards or medical bills, yet you paid that one to the detriment of the others, creating the preference.
If the amount was more than $600, guess what happens. The trustee gets to keep the money and use it to pay off equally all of the unsecured creditors that filed a claim in your case. Of course the trustee gets a commission for doing that.
What To Do Instead. Tell your lawyer. If you make him aware before your case is filed, he can possibly help you, or the family member you paid, keep that money. Keeping it out of the hands of the trustee is the goal. The timing of filing your case can be critical. This is a perfect example. Possibly by waiting until the year runs out, that preference payment becomes a non-issue.
Mistake #3: Letting Too Much Time Go By From First Seeing Your Lawyer to When Your Case is Filed.
So much can be written about this mistake that it is impossible to cover here. But, as one example, your attorney will ask for your gross income for the past 6 months. You will give her that information, but then not see her again for 6 weeks. Well, that means you will have to provide more information to catch up because time has passed and those 6 months are different now than they were before.
What To Do Instead: It’s really not anyone’s fault because the bankruptcy code looks at your life in “snapshots”. Yet life is lived in a continuum. It moves along day by day and things change as time goes on. The best thing to do is to wait and give your attorney all of the information he requires all at the same time. But, that is the ideal. We all have to do the best we can.