Mistake #1: Not telling your bankruptcy attorney about the credit cards you want to keep.
You see, whether your attorney comes to their office to ask you in person, or asks you to fill out a form she gives you: List all your creditors, their addresses, account numbers, and the amount of the debt. You have a credit card that you haven’t “used up” and you’ve been making minimum payments on it just to keep it from defaulting. You want to keep it because you want a little credit in case you need it.
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 will be obvious that you filed for bankruptcy because it will show up on your credit report.
What do you think your credit card issuer will do next? Will they let you keep your card? Will they give you more credit? No chance! Never in this life! What you’re doing is making things more difficult for yourself and your attorney.
How to do: Disclosure, disclosure, disclosure. When your attorney asks you to list each of your debts, list each of your debts. Every problem has a reason. Many are asked because they are required. But there are more requirements so your attorney can protect you.
Mistake #2: Failing to mention that you paid back the money to a relative.
Any decent bankruptcy lawyer will ask if you have paid off any money owed to your family within the past year or two. Every state is a little different. But the idea is that you don’t want to create what’s called a “preference”.
In a typical situation, if you made repayments to a parent, brother or sister in the past year before filing your case, you did just that – created a preference. Let’s say you have some credit card debt, some unpaid medical bills, and your family’s loans. That family member is the same class of creditor as the credit card or the medical bill, but you paid for one at the expense of the others, creating a preference.
If the amount exceeds $600, guess what happens. The trustee can keep the money and use it to pay off equally all the unsecured creditors with claims in your case. Of course, the trustee gets a commission for this.
How to do. Tell your lawyer. If you let him know before filing your case, he may be able to help you or a family member you paid keep the money. The goal is to keep it out of the hands of the trustees. The timing of filing a case can be critical. This is a perfect example. Probably by the time the year runs out, priority payments won’t be an issue.
Mistake #3: Taking too long from first seeing a lawyer to filing a case.
Too much could be written about this error to cover here. However, as an example, your attorney will ask you to provide your gross income for the past 6 months. You will give her this information but will not see her again for 6 weeks. Well, that means you’re going to have to provide more information to catch up, because the time has passed and now these 6 months are not the same as before.
How to do: It’s really not anyone’s fault because bankruptcy law takes a “snapshot” view of your life. However, life is continuous. It moves every day, and things change over time. The best thing to do is to wait and meanwhile give your attorney all the information he needs. However, that would be ideal. We all have to do our best.
