What not to do before you hire a bankruptcy attorney.

You get what you pay for.
When individuals face financial distress they often seek advice first from family members and friends.  What this can often lead to is a lot of “my friend said” and “back when I went through it” type advice.  While this advice can be comforting to the individual in distress, it can often lead to poor decision making.  No two cases are the same.  The fact that your friend did or got away with something doesn’t mean that it is what is in your best interest.  Some of the most common mistakes that I see in my office are listed below:
Transfers:  Often times individuals will come into my office after having recently transferred a number of assets out of their name.  This usually results from a friend telling them that they will lose their care or their home when they file.  The individual looking to save their assets transfers their vehicle to their child or transfers their home to their parents.  They are not trying to cheat the system, they are just trying to hold on to what little they have.  The problem is, any transfer that occurs within 6 years of filing bankruptcy that was not made for value can be unwound by the bankruptcy trustee.  This means that while the client may have been able to protect their vehicle, home or other asset using bankruptcy exemptions, now that the transfer was made the item may be lost to the bankruptcy estate.
Cash Out Retirement:  It breaks my heart when I hear this story “my friend told me I couldn’t keep my retirement if I filed, so I cashed it out and used it to pay down my debt.”  Your friend was wrong.  Pensions, 401ks, IRAs, 403bs and other retirement accounts are typically protected under bankruptcy laws.  Individuals can keep these assets and do not need to worry about losing them once they file.  However, once the money is gone it is gone.  The idea that individuals would lose their entire retirement savings and still need to file bankruptcy is truly disheartening.  Furthermore, cashing out these retirement accounts often leads to tax liabilities that survive the bankruptcy filing.  Individuals should never touch their retirement accounts to repay past debt until they have first consulted a bankruptcy attorney.
Remove Name From Bank Account:  A bank account is an asset.  Removing your name from a bank account is considered a transfer.  Even if the money in the account never truly belonged to you, a bankruptcy trustee can claim that by removing your name from the account you transferred your interest in the money to the co-owner of the account.  This is problematic for the reasons stated above under transfers.
Repay family members:  Many individuals who file for bankruptcy have spent the last few years struggling to avoid it.  During this time they often find themselves borrowing money from family members or friends.  When the time finally comes to file many individuals rush to repay their family members to that they don’t have to “include them in the bankruptcy.”  However, under the current bankruptcy laws these payments are considered to be “preferential” in nature.  Preferential payments made within one year of filing bankruptcy can be voided by the trustee and recovered to distribute to your other creditors.  This often means that your family member will face a lawsuit if they do not immediately pay the funds over to the trustee.  However, if the individual had simply waited until after the bankruptcy was filed, they would have a right to repay their family members without threat of legal action.
Before taking any action, individuals facing  financial distress should contact a qualified bankruptcy attorney.  To get your free initial consultation you can contact our office at (248) 629-6367.
 
 
Second Chance Legal Services is a bankruptcy law firm located in Madison Heights, MI.  While we are located in Oakland County, we service Wayne, Oakland and Macomb County residents.  As Detroit Bankruptcy Attorneys we specialize in helping individuals escape their burden of debt in order to get a fresh start on their bright future.
Because of our small size our clients get individual attention.  You will have the same bankruptcy attorney throughout your case whether you are in a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.  Your attorney will help guide you through the bankruptcy process in order to help you get a successful discharge of your debt.
It is important to note that Macomb County Bankruptcy Attorneys, Oakland County Bankruptcy Attorneys and Wayne County Bankruptcy Attorneys all deal with the same judges and trustees.  This is because all Michigan Bankruptcies are filed with the federal bankruptcy court in Detroit, MI.  For this reason, it is important that you choose an attorney not by location but rather by how comfortable you feel with them when you meet.  If you don’t feel comfortable with their knowledge, their experience or their demeanor you should seek out an attorney that you do feel comfortable with.
If you are interested in speaking with a Detroit bankruptcy attorney from Second Chance Legal Services, please contact our office at 248-629-6367 for a free initial consultation.