5 Costly Mistakes to Avoid Before Filing for Bankruptcy in Florida

Deciding to file for bankruptcy is rarely easy. By the time most of our clients walk into our Miami office, they have spent months — sometimes years — juggling bills, dodging collection calls, and trying to hold everything together. What many people don’t realize is that the weeks and months before you file can matter just as much as the filing itself. A few well-intentioned but poorly timed decisions can complicate your case, delay your discharge, or even put your property at risk.

Here are five of the most common mistakes we see — and how to avoid them.

1. Running Up Credit Cards Before You File

It can be tempting to think, “If this debt is going to be discharged anyway, why not use the card one last time?” Don’t. Purchases of luxury goods or large cash advances taken shortly before filing can be presumed fraudulent under the Bankruptcy Code. The creditor can object, and that portion of the debt may survive your bankruptcy entirely. If you know you are going to file, stop using credit as soon as possible.

2. Transferring Assets to Family or Friends

Signing your car over to your brother or moving money into a relative’s account “for safekeeping” is one of the most damaging things you can do before a bankruptcy. Trustees are specifically tasked with looking for transfers made in the months and years before a filing, and they have the power to undo them. Worse, concealing assets can jeopardize your discharge altogether. Florida’s exemption laws are generous — in many cases the property you were worried about could have been protected legally.

3. Draining Retirement Accounts to Pay Debts

This mistake breaks our hearts more than any other. Qualified retirement accounts — 401(k)s, IRAs, and pensions — are generally protected in bankruptcy. Cashing them out to make minimum payments on credit cards converts protected money into unprotected money, often triggers taxes and penalties, and usually only delays the inevitable. If you are considering touching retirement funds to service debt, talk to a bankruptcy attorney first.

4. Repaying Loans from Relatives First

Paying back your mother before you file feels like the honorable thing to do. Unfortunately, the Bankruptcy Code treats payments to “insiders” — family and close business associates — made within a year of filing as preferential transfers. The trustee can sue the recipient to recover that money for the benefit of all creditors. The result: your mother gets a demand letter, and the money is gone anyway. Once your case is closed, nothing stops you from voluntarily honoring family obligations.

5. Waiting Too Long to Get Advice

The single most expensive mistake is delay. People commonly wait until a wage garnishment begins, a foreclosure sale is scheduled, or a bank account is frozen before they pick up the phone. The earlier you speak with an attorney, the more options you have — and the more of the mistakes above you can avoid entirely.

Talk to a Miami Bankruptcy Attorney Before You Act

Every one of these mistakes is preventable with the right guidance. The Law Offices of Patrick L. Cordero has helped thousands of South Florida families get a fresh start the right way. Call (305) 267-3376 or contact us online for a free consultation — before you make a move you can’t take back.