Contact Us

P.O. Box 1932
Philadelphia, PA 19105

215-279-8940

Bankruptcy DOs & DON'Ts

THE DO’s

Your conduct and behavior before and during bankruptcy can damage or even cause your case to be dismissed. Understanding your rights and responsibilities can help ensure minimizing your risks. Consult with a Philadelphia bankruptcy lawyer to help you navigate the pitfalls commonly encountered by those seeking bankruptcy protection.

DO take bankruptcy seriously. It is a constitutional right, and courts take a very dim view of abuse of that right.

DO be honest and forthcoming on your bankruptcy petition. It is against the law to lie in bankruptcy proceedings, which includes on all the papers filed. That means spill your guts out; you sacrifice a small portion of your privacy to get a discharge of your debts. If you lie on your petition, or if you conceal assets, you could be in very serious trouble. The least that will happen is that your petition could be dismissed.

DO be honest and forthcoming with your Philadelphia bankruptcy attorney. Even if it is embarrassing, even if it makes you look like an idiot or a crook, it is better if your attorney knows. Anything that is not listed in your petition may not be discharged.

DO give your attorney everything in your relevant financial files even if it is embarrassing. If you have the document, you can be assured that someone else does too.

DO inform your Philadelphia bankruptcy attorney of everyone you owe money to. This includes family members and friends. You can always pay back debts after they have been discharged.

DO continue making payments on vehicles you want to keep. Creditors holding loans secured by a car or truck can usually repossess the vehicle without notice to you anytime you are in default in your payments. It will take longer for other creditors (including those secured by other property) to act on a debt that is in default.

DO reduce the amount withheld from your pay for taxes. If you expect to get a tax refund, reduce your withholding so that you do not get refund. Federal and state tax refunds are routinely seized in Chapter 7, and may affect plan payments in Chapter 13.  But do not reduce the withholding for tax so much that you will have a big tax bill to pay!

DO close your checking and saving accounts at any banks where you also have a credit card or line of credit with. If you stop paying on your credit card or line of credit, the bank can actually go into your checking and savings account and pay your credit card/line of credit.

THE DON’TS

DON’T pay back relatives or business associates who have lent you any money. Payment to an insider, which includes relatives, friends and business associates, within one year before you file bankruptcy is a preference. The trustee may recover preferences from the person that was paid and divide the money between all of your creditors. (Payment of $500 or more to any other creditor within 90 days before the case is filed is also a preference.) You can pay back anyone you like after the bankruptcy.

DON’T talk to your creditors directly after you have filed for bankruptcy. Tell them to talk directly to your Philadelphia bankruptcy lawyer. If you receive mail from them, forward it to your attorney immediately.

DON’T keep a creditor off your bankruptcy petition for any reason. If you intend to pay them back, you can anyway, after the bankruptcy.

DON’T run up a lot of bills immediately before you file. If you max out your credit cards or take out a loan before you file, the court could find your petition to be fraudulent and dismiss it, or except those debts from discharge.

DON’T borrow from or withdraw 401k, IRA, and ERISA qualified savings and retirement plans to pay bills. Early withdrawal of these funds makes you liable for penalties and taxes which may not be discharged in bankruptcy, and you may be able to exempt and keep all funds maintained in these accounts.

DON’T borrow money on your home to pay unsecured debts (i.e. credit card, utility or medical). If you take out a second mortgage on your home, you may be converting debt which would have been discharged in bankruptcy into debt which you will still have to pay in order to keep your home. These additional payments could be high enough to cause you to lose your home.

DON’T put property you own into someone else’s name to avoid it being taken by creditors or the trustee. That kind of transfer is a fraud on creditors and can result in your discharge being denied. In addition, the trustee can take the property from the person to whom it was transferred.

DON’T attempt to sell your property for less than what it’s worth. This will not reduce the amount you eventually have to repay, and you or whoever you sold it to may end up stuck with the difference.

DON’T run up your credit card debt prior to filing a bankruptcy. The court may view this as an attempt to exploit the bankruptcy system, and the judge may except the debt from discharge.

DON’T buy any luxury items prior to filing for bankruptcy. Luxury items usually include anything with a value of $500 or more, but can occasionally include items of lesser value.

Contact a Philadelphia bankruptcy attorney at (215) 279-8940 for a consultation.

Arjont Group Law Office of Roger Traversa is designated by Congress as a debt relief agency. Among other things, we help people file for relief under the Bankruptcy Code. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult a Philadelphia bankruptcy attorney for individual advice regarding your own situation.