Mistake #1: Not Telling Your Bankruptcy Attorney About the Credit Card You Want to Keep.
There it is, whether your attorney asks you in person in their office, or whether it’s on a form he gives you to fill out: List all your creditors, their addresses, account numbers and how much they owe. You have one credit card that isn’t “maxed out” and you’ve made the minimum payment just to keep it from defaulting. You want to save it because you want a little credit, for emergencies.
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 every month. Sooner or later, it will be obvious that you filed for bankruptcy because it will be on your credit report.
What do you think your credit card issuer will do? Will they let you keep your card? Will they give you more credit? Not a chance! Not in this life! What you have done is making things very difficult for yourself and your attorney.
Which must be done: Reveal, reveal, reveal. When your attorney asks you to list every debt you have, then make a list of every debt you have. There is a reason for every question. Many are asked because they are required. But much more is required for your attorney to protect you.
Mistake #2: Not Mentioning You Paying Money Back to Relatives.
A good bankruptcy attorney will ask if you paid back any money you owed to family members in the past year or two. Every state is a little different. But the idea is that you don’t want to create so-called “preferences”.
In general, if you paid back a parent, brother or sister over the past year before your case was filed, you are doing just that – making preferences. Let’s say you have credit card debt, some unpaid medical bills, and loans from your family members. Those family members are in the same class of creditors as credit card or medical bills, but you’re paying them to the detriment of others, creating preference.
If it’s over $600, guess what happens. The trustee can keep the money and use it to pay off all unsecured creditors who filed claims in your case equally. Of course the guardian gets a commission to do that.
What To Do Instead. Tell your attorney. If you make him aware before your case is filed, he may be able to help you, or a family member you are paying, keep the money. Keeping that out of the hands of the trustee is the goal. The timing of your case filing can be critical. This is a perfect example. Maybe by waiting until the year is up, those preference payments won’t be a problem.
Mistake #3: Letting go of too much time from the first time you see your attorney to the time your case is filed.
So much can be written about this error that it is impossible to cover it here. But, as one example, your attorney will ask you for your gross income for the last 6 months. You’ll give him that information, but then not see him again for 6 weeks. Well, that means you have to provide more information to catch up because time has passed and those 6 months are different now than before.
Which must be done: It’s really no one’s fault because bankruptcy codes see your life in a “snapshot”. But life is lived on a continuum. It moves all day after day and things change with time. The best thing to do is wait and give your attorney all the information he needs at the same time. But, that’s ideal. We all have to do the best we can.
Jay S Lowenthal