Mistake #1: Not telling your bankruptcy attorney about a credit card you want to keep.

There you have it, whether your attorney is asking you in person at his office, or on a form he gave you to fill out: list all your creditors, their addresses, account numbers, and how much you owe. You have a credit card that isn’t “topped up” and you’ve been making minimum payments just to avoid going into default. He would like to keep it because he wants a little credit, in case of an emergency.

What they don’t realize is that most creditors, especially the big banks that issue Visa, Master Card, Discover, and American Express, check your credit report every few months, if not monthly. Sooner or later, it will be obvious that you have filed for bankruptcy because it will be right there on your credit report.

What do you think your credit card issuer will do then? Will they let you keep your card? Will they give you more credit? Unlucky! Not in this life! What you have done is make things incredibly difficult for yourself and your attorney.

What to do instead: Reveal, reveal, reveal. When your attorney asks you to list all the debts you owe, list all the debts you owe. There are reasons for each question. Many wonder why they are necessary. But many more are required so that your lawyer can protect you.

Mistake #2: Not mentioning that you paid a family member back.

Any decent bankruptcy attorney will ask you if you paid money owed to a family member in the last 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 state, if you paid a parent, brother or sister in the last year before your case was filed, you did exactly that – you created a preference. Let’s say he had some credit card debt, some unpaid medical bills, and a loan from his relative. That family member is in the same class of creditors as credit cards or medical bills, but you paid that one to the detriment of the others, creating the preference.

If the amount was more than $600, guess what happens? The trustee keeps the money and uses it to equally pay all unsecured creditors who sued in your case. Of course, the trustee receives a commission for doing that.

What to do instead. Tell your lawyer. If you report it before your case is filed, it may be able to help you, or the family member you paid, keep that money. Keeping it out of the trustee’s hands is the goal. The timing of presenting your case can be critical. this is a perfect example. Possibly, by waiting until the end of the year, that preferential payment ceases to be a problem.

Mistake #3: Allowing too much time to pass from the first visit to your attorney to the presentation of your case.

So much can be written about this bug that it is impossible to cover it here. But, as an example, your attorney will ask for your gross income for the last 6 months. You’ll give her that information, but then you won’t see her again for 6 weeks. Well that means you will have to provide more information to catch up because time has passed and those 6 months are different now than they were before.

What to do instead: It’s really no one’s fault because the bankruptcy code looks at your life in “snapshots.” However, life is lived on a continuum. It progresses day by day and things change as time goes by. The best thing to do is wait and give your attorney all the information they need at the same time. But, that is the ideal. We all have to do the best we can.

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