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Bankruptcy Court
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United States Bankruptcy Court
Middle District of Florida

George C. Young Federal Bldg
400 West Washington Street
Orlando, FL 32801

Bankruptcy Court Website

US Bankruptcy Court Location, Orlando Florida
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Bankruptcy - Things to Avoid
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Things to Avoid Before Filing your Bankruptcy Case

The types of actions you should avoid before filing your Bankruptcy case can be organized into three groups. The first group includes actions that are forbidden by Bankruptcy Code and may cause your case to be dismissed. The second group includes transactions are not forbidden by the Bankruptcy Code but can get you in trouble with the Trustee, cause certain debts to not be discharged, or potentially result in having the transaction forcibly reversed. The last group includes actions that are not necessarily stumbling blocks in the bankruptcy process but are unwise and could be handled better with some forethought.

I. Actions Prior to Filing Bankruptcy Which May Result in Having Your Case Dismissed

Fraud - The most common basis for denying a debtor's bankruptcy discharge is because a debtor either hides assets or fraudulently transfers them prior to filing bankruptcy in an effort to keep them out of the hands of their creditors. In essence, people who do either of these actions are not the type of honest debtors who are entitled to relief under the Bankruptcy Code.

Conversion - You can also create a problem by converting non-exempt assets into exempt assets prior to filing bankruptcy. For example, when a person takes all of her cash out of the bank or sells stock the week before bankruptcy and puts it a her retirement account. These types of cases usually revolve around the debtor's intent but when there is no direct evidence of the debtor's intent, the court can look at factors such as how soon bankruptcy was filed after the conversion was made to form its own conclusions.

Hiding or Failing to Disclose Records - Another way a debtor's pre-filing actions can result in a denial of a discharge involves the purposeful destruction or hiding of financial records. The bankruptcy trustee and the Court in general require certain documentary evidence of a debtor's financial history in the time leading up to bankruptcy. If those documents are not provided and a sufficient, provable excuse can not be provided as to why, the Court can deny your discharge altogether for failure to maintain records. This tends to be more of an issue when small businesses are involved or assets can not be located, but should not be taken lightly in any case.

2. Property: Most Chapter 7 filers do not lose any property. Federal and/or State exemption laws allow a debtor to protect fairly generous amounts of property. The bankruptcy trustee concludes most cases as being “no asset“ cases. This means that you have no property that you are required to forfeit. Exemptions vary from case to case and we will discuss all exemptions available to you at your initial consultation.

II. Actions Which May Result in a Partial Discharge or Other Issues

Some debts are non-dischargeable due to the unique status granted to them by Congress and the courts. Other debts are non-dischargeable because of improper actions taken by a debtor in relation to that particular debt. These types of actions are all rooted in fraud and include, generally:

* Debt incurred through actual fraud - For example, if you get a signature loan with no intent to pay it back or write a check which you know will bounce.

* Luxury good or services - Generally includes consumer debts owed to one creditor for amounts higher than $1,000.00 incurred in the 60 days before filing bankruptcy.

* Cash advances - Includes cash advances taken within 60 days before a bankruptcy filing.

* False financial statements - For example, if you grossly misstate your income on a car loan application in order ensure approval.

Ordinarily, an adversary proceeding must be successfully brought by the creditor alleging these types of fraud in order for that particular debt to be rendered non-dischargeable. Adversary proceedings, in general, are rarely filed, however, it is best to play it safe and avoid any of the above actions if you want a smooth bankruptcy.

Another problematic issue which does not involve discharge but can have negative consequences is the preference doctrine. The preference doctrine basically states that payments made to general creditors in the 90 days prior to filing bankruptcy or to "insiders" - such as family members - in the year prior to filing bankruptcy can be considered inequitable payments and undone by the bankruptcy trustee as such.

The exact requirements for establishing a preferential payment are complex, but the bottom line is that if you decide to pay your mother back in the year before filing bankruptcy for money she loaned you and let your other creditor's debts go unpaid, the trustee may sue your mother to take that money back and distribute it amongst all your creditors - hardly the result you were aiming to achieve. There is nothing wrong with voluntarily repaying a debt after it is discharged so save your mom some grief and hold off on that payment.

III. Actions Taken Prior to Filing Bankruptcy Which Should Be Reconsidered in General

One of the biggest mistakes people make when it comes to bankruptcy is waiting too long to speak with a bankruptcy attorney about their options. Before you take any of the following actions, you may want to talk with a bankruptcy attorney regarding their effectiveness and possible ramifications on a bankruptcy filing:

* Taking money out of a retirement account - Not only is this money usually exempt from creditors while it stays in the retirement account, you also will have to pay taxes on the disbursement even if you do later file bankruptcy.

* LSigning off on a debt consolidation plan - The non-consolidated debt may be dischargeable through bankruptcy and the new loan given for the consolidation may not be.

* Cash advances - Includes cash advances taken within 60 days before a bankruptcy filing.

* Paying off a credit card with the hopes of keeping it through bankruptcy - For example, if you grossly misstate your income on a car loan application in order ensure approval.

Conclusion While most pre-filing actions which can cause major problems for a bankruptcy debtor are fairly obvious, not all are so and much care should be taken to ensure that one does not fall on the wrong side of the bankruptcy system. The consequences can be harsh when the taint of fraud is sensed in a bankruptcy filing. If you have any questions please call and discuss your concerns with The Law Offices of Roy A. Praver BEFORE you act.


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 Additional Information

Look through the links below to additional information about your rights on filing Bankruptcy. Once you have looked through the information then call the Law Offices of Roy A. Praver to setup your free bankruptcy consultation to determine if filing Bankruptcy is the correct step for you.
 Contact Us

If you are considering filing for bankruptcy, you do not have to make this decision alone. The Law Offices of Roy A. Praver can provide you with the help and support you need to handle your financial situation. Contact the Law Offices of Roy A. Praver today at 321-383-3445 to schedule a free initial consultation.

Titusville, FL Office
O: 321-383-3445
F: 321-268-9564

Prior to your appointment, we ask that you send us an email and briefly describe or list any questions you have about bankruptcy. Most of your questions can be answered from information provided on our website, but please feel free to contacts us. We are always here to help you.

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