What not to do before filing bankruptcy?

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Filing for bankruptcy is a significant decision that can have long-lasting impacts on an individual’s financial future. It is essential to approach the process with caution and avoid certain actions that could complicate or hinder the bankruptcy proceedings. In this article, we will discuss what not to do before filing bankruptcy to ensure a smoother process and better outcomes.

1. Incurring New Debt

Incurring New Debt: One of the most crucial things to avoid before filing bankruptcy is taking on new debt. This includes credit card purchases, loans, or any other form of borrowing. Incurring new debt shortly before filing bankruptcy may raise concerns about your intentions and could lead to those debts being excluded from the bankruptcy discharge.

2. Transferring Assets

Transferring Assets: It is important not to transfer assets to family members, friends, or any other individuals before filing bankruptcy. Such transfers can be seen as an attempt to hide assets from creditors and may be considered fraudulent. The bankruptcy court can reverse these transfers and seize the assets to satisfy your debts.

3. Making Preferential Payments

Making Preferential Payments: Avoid making preferential payments to certain creditors before filing bankruptcy. Paying off some creditors while neglecting others can be seen as favoritism and may be considered preferential treatment. The bankruptcy court can reverse these payments and redistribute the funds equally among all creditors.

4. Draining Retirement Accounts

Draining Retirement Accounts: It is generally not advisable to withdraw funds from retirement accounts to pay off debts before filing bankruptcy. Retirement accounts are often protected in bankruptcy, and depleting them to pay off debts may not be beneficial in the long run. Consult with a bankruptcy attorney to understand the implications before making any decisions regarding retirement accounts.

5. Hiding Assets or Income

Hiding Assets or Income: Concealing assets or income from the bankruptcy court is a serious offense. It is crucial to provide full and accurate information about your financial situation. Failing to disclose assets or income can lead to severe consequences, including the dismissal of your bankruptcy case or criminal charges.

6. Repaying Debts to Family or Friends

Repaying Debts to Family or Friends: While it is natural to want to repay debts to loved ones, it is important to avoid doing so before filing bankruptcy. Repaying debts to family or friends within a year before filing bankruptcy can be considered preferential treatment and may be subject to clawback by the bankruptcy court.


In conclusion, before filing bankruptcy, it is crucial to avoid incurring new debt, transferring assets, making preferential payments, draining retirement accounts, hiding assets or income, and repaying debts to family or friends. By avoiding these actions, individuals can ensure a smoother bankruptcy process and improve their chances of a successful financial fresh start.


– www.uscourts.gov
– www.nolo.com
– www.bankrate.com