Very often People consult with me regarding the filing of a bankruptcy who might otherwise qualify, but they have unwittingly stepped into a situation which might cause them to choose not to file. 

One example is student loans.  There is a rule in Connecticut that says if you have transferred property to someone else during the four years before the filing your case, the Bankruptcy Trustee could go to that person or entity and take the money back (if you could have qualified for bankruptcy at the time of the transfer).  Many people don’t realize this rule includes student loans.  Thus if you paid for your child’s college in the last four years, there is a chance the Trustee could try and take the money back from the college, meaning that not only are you stuck with the loan, but the college could now come after your child to repay them.  Thank your legislators for not rectifying this one.

Another example is joint accounts.  In Connecticut, a creditor can come after a joint account even if the money in it is not the debtors and solely belongs to someone else such as a parent.  Very often one will put their name on their mother’s bank account for convenience.  But what if that person goes into debt.  The creditor or bankruptcy trustee might go after the mother’s money since it is a joint accouont.  Again, you can thank your legislators for this one.  In Rhode Island the money belongs to whoever put it in there.  In Connecticut it belongs to both.  You are probably better off doing a simple POA rather than making the account joint if there is any chance you will be in debt.

And finally, the initial qualification for bankruptcy is based on your earnings for the last six months from any source, this includes bonuses, withdrawals from retirement accounts, pension funds, etc.  If you are going to be filing bankruptcy it makes sense not to have high income during the six months before you file.  The good news is that social security benefits don’t count.

Well, there it is, three bankruptcy mine fields to be aware of if you are contemplating filing.