Among the simplest reasons to hire a bankruptcy lawyer while you are asking the court for relief from your debts is to avoid accusations of fraud. In the least-bad scenario, fraud is grounds for a judge to dismiss your petition and leave you with the debts. In the worst-case scenario, fraud allegations can become criminal charges.
Neither you nor your bankruptcy attorney wants to see any of that happen. Here are three steps you can take to reduce the risk that a court might declare your bankruptcy filing to be fraudulent.
Don't Sell Anything
Once it becomes clear that you're going to need to pursue bankruptcy, refrain from selling anything that you don't have to. Creditors have the right to ask the court to claw back assets and money that were transferred in the months or years before a bankruptcy filing. If the creditors win this argument, the court may order parties that received property or money from you to turn those items over. Naturally, that may lead to further litigation if the recipients are upset.
If you must sell something, make sure to document the entire process. Verify what the fair market value is for the item. If at all possible, avoid selling anything for below the fair market price. Failing to do so, especially if you moved the assets to a friend or family member, may be seen as a bad-faith effort to hold onto them.
Collect Account Information
Particularly if you have many financial accounts, it might take some effort to track everything down. However, you'll want to have the information for every account in your name available for the court and the creditors' counsel to review. Get current totals for all of the accounts, too. While you don't have to get the number perfectly right, you do want to be able to give the court a ballpark idea of what you're working with within a few hundred dollars.
Verify Eligibility
It's prudent to sit down with a bankruptcy attorney and verify that you are eligible to file before starting the process. For Chapter 7 cases, people who make less than the state's median income are presumed to be eligible. You might still be able to file based on means-testing, but that's a more involved process that involves reviewing your finances with the help of a professional.
You should also be able to confirm that your current debt load is unmanageable. This means proving that your current income isn't sufficient to pay down the debts in the foreseeable future, especially when factoring in fees and interest.
To learn more, contact a law firm like the Martinez Law Firm.
