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Posted On September 30, 2024
Dos and Don’ts of Filing for Bankruptcy

Dos and Don’ts of Filing for Bankruptcy

Knowing the dos and don’ts of filing for bankruptcy in Nevada can help you avoid legal issues, protect your rights, and streamline the process. Some dos of filing bankruptcy include seeking legal help from a bankruptcy attorney, sharing all relevant documents and details with your lawyer, disclosing all assets, filing your taxes, and separating money. The don’ts include leaving out some income, taking new debts, moving assets, selectively repaying debts, and filing when you are on the verge of receiving a significant asset or income.

Petition for Bankruptcy on an office table with a pen, stamp and book. dos and don'ts of filing for bankruptcy

Learn more about the dos and don’ts of filing for bankruptcy in Nevada by calling experienced bankruptcy attorneys at Randolph Law Firm, P.C. 702-757-7777.

What Are the Dos of Bankruptcy in Nevada?

Taking the right steps can make your bankruptcy case successful.

Do Seek Legal Help

Bankruptcy law can be confusing to someone with no legal knowledge. Bankruptcy also comes in different forms. So, it is crucial to know which option is appropriate for your situation.

Individuals often file either Chapter 7 or Chapter 13 bankruptcy. In fact, Chapter 7 accounted for about 80% of all bankruptcy filings in Nevada in 2023. Seeking legal help when considering bankruptcy allows you to make an informed decision.

Most bankruptcy attorneys in Nevada provide free initial consultations. A phone or in-person consultation with an attorney can help you understand your rights and legal options. It also allows you to find an attorney who can support you through the bankruptcy process. This support ranges from guiding you on how to file for bankruptcy and attending creditor meetings to negotiating with creditors and representing you in court.

Do Share All Relevant Documents and Details With Your Attorney

Share all documents and information about your financial situation with your attorney. Let the attorney know your bank account balance, the types of assets you own, your creditors, and the amount owed. Also, inform your attorney of any huge purchases you have made recently. Disclosing everything allows your lawyer to assess your financial situation accurately and determine the best action.

Do List All Your Assets

List all your assets in your bankruptcy petition. Disclose how much is in your bank account, even if it is a small amount. List any property in which you hold an ownership interest. Knowingly leaving out an asset is a criminal offense, carrying a huge fine and lengthy prison sentence.

You may ask, “Can I keep my assets if I file for bankruptcy?” Whether you will keep your assets if you file for bankruptcy will depend on whether you are filing under Chapter 7 or Chapter 13. Chapter 7 allows you to retain your exempt assets and sell non-exempt ones. Chapter 13 lets you keep all your assets, as long as you comply with the repayment plan.

Do File Your Taxes

Ensure you have filed all the required state and federal income taxes before starting the bankruptcy process. Copies of your latest tax filings will be mandatory when pursuing a Chapter 7 bankruptcy. Otherwise, the court may keep your case open until you file the tax return and obtain a refund. Copies of your past four years of tax filings will be necessary when filing a Chapter 13.

Do Separate Money

Have a specific account for money that may be eligible for protection. If you have been collecting personal injury settlements, for instance, you should have a separate account for that money. Doing that reveals the real source of the money and enables your attorney to find ways of protecting it during bankruptcy.

The Don’ts of Bankruptcy

In addition to taking the right steps, avoiding common mistakes can protect your bankruptcy case.

Don’t Leave Out Income

Disclose income you are generating on top of your regular job. This applies even if that income is small. You must include all information regarding your income when completing bankruptcy paperwork.

You must include your spouse’s earnings on your bankruptcy plan, even if the spouse is not declaring bankruptcy. The court cannot compel your spouse to assist in repaying your debts. It can, however, require the spouse to meet certain household financial obligations, such as buying some household items.

Don’t Take New Debt

Do not take on new debt before filing bankruptcy. The creditors may challenge your discharge if you add more debt two or three months before the bankruptcy. They may claim that you incurred new debt without any plan to repay it, and the court should declare that debt non-dischargeable in bankruptcy.

Don’t Move or Hide Assets

Bankruptcy forms require you to provide details of assets or property you possess (or will possess). This requirement may tempt some filers to conceal, transfer, or sell some assets before filing bankruptcy. Resist this temptation. Otherwise, the court will refuse to discharge some of your debts and may even impose criminal penalties.

What if you sold a property to cover essential expenses before filing for bankruptcy? This type of transaction is legal. You should, however, inform your attorney and provide relevant documents to back up your claim.

Don’t Selectively Repay Debt

Repaying debt from friends and family members within 12 months before filing bankruptcy or other regular creditors within 3 months before filing could be deemed a “preferential transfer.” This type of transfer is reversible in bankruptcy.

The bankruptcy trustee may initiate an adversarial proceeding to recover the money from the individual or entity you paid. The trustee may then distribute the money among all your creditors equally.

Don’t File When You Are on the Verge of Receiving a Significant Asset or Income

Consider postponing bankruptcy if you expect to get a significant asset or money soon. Perhaps you are about to inherit a valuable property or asset within a year. Or maybe a substantial income tax refund is about to hit your account. Regardless of the source, you may no longer be bankrupt once the money gets into your bank account.

You may use the funds to pay back your debts and work toward regaining financial stability. Be sure to talk to a bankruptcy attorney if this situation applies to you. The attorney will carefully analyze your situation and discuss all your options to help you make a wise decision.

Other Common Mistakes to Avoid in Bankruptcy

In addition to the dos and don’ts of filing for bankruptcy, there are other mistakes that can increase the risk of your bankruptcy petition getting denied. You may also incur costs trying to correct these mistakes. Other common mistakes to avoid in bankruptcy include:

Filing Under the Wrong Chapter

Many people fail to get out of the financial hole because they file under a chapter that does not address their unique needs. Chapter 7 is an ideal option for you if you lack sufficient disposable income to pay your debts every month consistently. Chapter 13 is a perfect choice if you have adequate income to meet monthly debt repayment requirements.

Talk to a bankruptcy lawyer before pursuing relief under any Chapter. The lawyer will help you determine the best option for your situation. The lawyer will also discuss how long it takes to file bankruptcy so you can plan accordingly.

Waiting Too Long to Seek Bankruptcy Relief

Waiting too long to seek debt relief by filing bankruptcy is one of the most common mistakes that debtors make. You can save money and get your debt situation under control if you file for bankruptcy in time. So, it is crucial to know when to file for bankruptcy in Nevada.

Using Retirement Savings or Taking a Home Loan

Many debtors consider bankruptcy a last option and do everything possible to avoid it. Some may cash out their retirement funds to pay off a debt. Others may take out a loan against their home or other valuable property to meet their debt repayment obligations. These moves, however, are costly and hurt your future financial freedom.

Taking out debts against your home may result in foreclosure if you fall behind on repayment. Cashing out your retirement funds early could attract hefty penalties. It may also be hard to build up your savings again.

Reckless or Improper Bankruptcy Paperwork Preparation

Your documentation must capture all relevant information regarding your assets, loans, earnings, expenses, and financial transactions. The court may dismiss your case if you file incomplete or inaccurately filled out paperwork. You will incur additional charges if your initial filing has some missing paperwork, and you must do an additional filing to rectify the mistake.

Omitting a creditor from the paperwork could prevent that debt from getting discharged. Attempting to hide an asset by excluding it from the paperwork amounts to fraud and could result in serious criminal implications. Additionally, the bankruptcy trustee may discover the exclusion and seize and sell the asset. The trustee will then use the proceeds to pay off your debts.

At Randolph Law Firm, P.C., we can help you achieve long-term financial stability by crafting a debt relief solution that addresses your unique needs. Contact us today to speak with our bankruptcy attorneys. 

author-bio-image author-bio-image
Taylor L. Randolph

Taylor L. Randolph, the founder of Randolph Law Firm, P.C., located in Las Vegas, Nevada. He focuses his practice on bankruptcy, foreclosure prevention, and IRS tax problems. An award-winning attorney who is admitted to practice before the IRS nationwide, Taylor excels in the representation of individuals and businesses who are facing legal challenges.

Years of Experience: Nearly 20 years
Nevada Registration Status: Active

Bar & Court Admissions: Nevada State Bar Association U.S. District Court District of Nevada, 2006 U.S. Supreme Court, 2006 U.S. Tax Court, 2006

author-bio-image author-bio-image
Taylor L. Randolph

Taylor L. Randolph, the founder of Randolph Law Firm, P.C., located in Las Vegas, Nevada. He focuses his practice on bankruptcy, foreclosure prevention, and IRS tax problems. An award-winning attorney who is admitted to practice before the IRS nationwide, Taylor excels in the representation of individuals and businesses who are facing legal challenges.

Years of Experience: Nearly 20 years
Nevada Registration Status: Active

Bar & Court Admissions: Nevada State Bar Association U.S. District Court District of Nevada, 2006 U.S. Supreme Court, 2006 U.S. Tax Court, 2006