Knowing what you should do in the months, weeks and days ahead of a bankruptcy filing is important. But in a sense, knowing what you should NOT do is even more important — because making mistakes, following the wrong advice, or deliberately trying to cut a corner or two are disasters waiting to happen.

To avoid that very costly and stressful fate, here are 3 things you should NOT do when preparing to file for bankruptcy:

• Start paying back family and friends.

It may seem like paying back family and friends is the ethical thing to do — or maybe, just the wise thing to do, since at least creditors don’t sit across from you at the dinner table or show up at family reunions!

However, the court is almost certainly going to take a dim view of this practice. In their eyes, it’s not up to debtors to prioritize who gets paid back in what order, and how much. That is up to the court, as represented by the trustee. If the trustee deems that any monies paid to select creditors in advance of your bankruptcy filing are deemed “preferential transfers,” then those funds may be reclaimed. Try explaining that around the dinner table or at a family reunion!

• Max out on credit cards.

Some people who specialize in doling out advice on things they know staggering little about — and of course, who are never held accountable when their guidance turns out to be catastrophic — may tell you to “max out your credit cards”; i.e. spend, spend, and spend some more in advance of a bankruptcy filing. After all, it’s free money, right?

Wrong! The trustee will certainly look at your credit card statements (and bank account statements) for several months or even years prior to a bankruptcy filing, to verify that there was no excessive spending that represents a circumvention of the rules.

With this being said, if you legitimately spent $1500 on car repairs nine months ago and plan on filing for bankruptcy next month, then this doesn’t necessarily mean that you’ll be accused of trying to pull a fast one. As long as you can justify the expense and there is no pattern to suggest that you significantly increased your spending pattern in advance of a bankruptcy filing, you should be fine.

• Withdraw funds from your retirement account.

Even if they plan on filing for bankruptcy, some people tap into their retirement funds to pay off their most aggressive creditors — like the IRS. This is usually a mistake, because you should be able to protect most — if not all — of your retirement funds per a bankruptcy filing.

The Bottom Line

Filing for bankruptcy is much more complex that most people realize. In addition to multiple rules that vary state to state, there are specific deadlines that must be adhered to. Mistakes along the way — accidental or by following bad advice — can be devastating.

To get the facts and counsel that you need contact the Law Office of Charles Huber today. We have over 30 years of experience filing consumer bankruptcy cases.