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Making sound financial decisions can be difficult with creditors breathing down your neck. However, if you’re considering bankruptcy as a means to alleviate debt, minding your P’s and Q’s is essential to ensuring a favorable outcome. Below, Rochester, NY, bankruptcy lawyer Thomas A. Corletta, Attorney at Law shares 3 things to avoid prior to filing.

3 Things to Avoid Before Filing Bankruptcy

Cashing Out Your Retirement

When you are facing overwhelming debt, your creditors will collect money from you by any means possible. This includes garnishing your wages and freezing your bank accounts. However, certain retirement accounts are exempt from the claims of creditors. As such, your creditors will be unable to seize your 401K or IRA, so long as you do not cash them out and convert them into accessible cash in a bank account. Also remember you will incur tax penalties for cashing out a retirement account which cannot be discharged in bankruptcy.

Rack Up New Debt

bankruptcyRacking up new debt in the months prior to your bankruptcy may compromise the dischargeability of those debts. Upon seeing such debts, creditors may argue you incurred “eve of bankruptcy” debt without intending to repay it. There are rules against “loading up” on credit cards just prior to filing. As a result, your creditors may object to the discharge of such debt and if successful, you will retain the debt post-bankruptcy, as well as incur substantial attorney fees defending such actions.

Fail to File Income Tax Returns

Failure to file income tax returns in the three years prior to your bankruptcy will only cause problems. Current tax returns are required by the court, as you are required to document your income and make full disclosure. Your income determines eligibility in a Chapter 7 and/or what you can pay in a Chapter 13.

If you are considering Chapter 7 or Chapter 13 bankruptcy in Rochester, NY, Thomas A. Corletta, Attorney at Law is the lawyer to call. Backed by over 37 years of legal experience, attorney Corletta will provide you with the legal advice and representation you need to enjoy the fresh financial start you’ve been searching for. Free consultations are available in most circumstances. Learn more about his practice online or call (585) 546-5072 to schedule an appointment.

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