Bankruptcy is a way for individuals who are struggling with their finances to get a fresh start by discharging — that is, erasing — some or all of their debts. Unfortunately, debtors who are fearful of losing their property during bankruptcy sometimes take misguided actions that can hurt or even ruin their chances for a successful discharge.

Whether you are considering a Chapter 7 liquidation or a Chapter 13 reorganization, you should avoid these common mistakes debtors make before filing:

• Transferring your assets — Some debtors try to hide money or other property by transferring it to family or friends before bankruptcy, based on an understanding that it will be returned. Or they may sell property to a close associate, often for much less than it is worth. This type of arrangement may be flagged as a fraudulent transfer. The bankruptcy trustee has the power to unwind any fraudulent transfer you made within two years of the bankruptcy. And by making such a transfer and failing to list the asset in your petition, you lose the opportunity to exempt that property from being sold off during the bankruptcy.
• Running up credit card debt — Some debtors deliberately run up credit card debt on the assumption that it will be wiped out in their impending bankruptcy. However, this can be considered an abuse of the bankruptcy process. Creditors may successfully object to the discharge of credit card purchases made within 90 days before you filed for bankruptcy. You might end up having to pay those card balances after bankruptcy.
• Consolidating and transferring debt — Another mistake debtors make is to pay off one creditor by incurring new or additional debt with another. A creditor can object to discharging debts of more than $1,000 you incurred with that creditor within 70 days of bankruptcy, even if the money was used to pay another debt. As a result, you may still owe those newly incurred debts when your bankruptcy is finished.
• Not consulting with a lawyer — One of the biggest mistakes you can make in bankruptcy is to try to do it yourself. Few unrepresented debtors successfully complete the process. It takes an experienced bankruptcy attorney to maximize the protections that the law provides. There are many stumbling blocks you might encounter during bankruptcy that can be fatal to your chances or result in your losing more property or owing more debt than necessary.

At the Law Offices of James C. Zimmerman, we give our bankruptcy clients detailed, personalized and reliable advice and advocacy before and at every step of the bankruptcy process. Call us at 973-764-1633 or contact us online to schedule a free consultation at any of our five offices, conveniently located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley.