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Mistake #1: Not telling your bankruptcy attorney which credit card you want to keep.
Are you there, is your attorney asking you in person at his office, or is it on a form he gave you to fill out: a list of all your creditors, their addresses, account numbers, and how much is owed. Create You have a credit card that is not “maxed out” and you are paying the minimum just to keep it from going into default. You’ll want to keep 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, MasterCard, Discover, and American Express, check your credit report If not monthly then every few months. Sooner or later, it’s going to 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? no chance! Not in this life! What you have done has made things incredibly more difficult for you and for your attorney.
What to do instead: Reveal, reveal, reveal When your attorney asks you to list each of your debts, list each debt you have. There are reasons for every question. Many are asked because they are necessary. But much more is asked of you so that your attorney can protect you.
Mistake #2: Not mentioning that you returned the money to a relative.
Any decent bankruptcy attorney will ask you if you owe any money owed to a family member in the past year or two. Every state is a little different. But the idea is that you don’t want to create what is called a “preference”.
In a typical situation, if you made payments to a parent, brother or sister during the past year before you filed your case, you did exactly that – created a preference. Let’s say you have some credit card debt, some unpaid medical bills and a loan from your family member. That family member is in the same category of creditors as credit cards or medical bills, yet you paid them off to the detriment of others, making it a priority.
If the amount was over $600, guess what happens. The trustee is charged with keeping the money and using it to evenly pay all unsecured creditors who filed claims in your case. Of course the trustee gets a commission for doing so.
What to do instead. Tell your lawyer. If you let him know before filing your case, he may be able to help you, or have the family member you paid keep the money. The goal is to keep it out of the hands of the trustee. The timing of filing your case can be important. This is a perfect example. Possibly by waiting until the end of the year, that preference payment becomes a non-issue.
Mistake #3: Allowing too much time to pass from the time you first see your attorney to the time your case is filed.
So much can be written about this mistake that it is not possible to cover it here. But, as an example, your attorney will ask about your gross income for the last 6 months. You give him that information, but then don’t see him again for 6 weeks. Well that means you have to provide more information to catch up because time has passed and they are different now than they were 6 months ago.
What to do instead: It’s really nobody’s fault because the Bankruptcy Code views your life in a “snapshot”. Yet life lives in a continuum. It goes on day to day and things keep changing with the passage of time. The best thing to do is to wait and give your attorney all the necessary information at the same time. But, this is ideal. We all have to do our best.
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