If you owe big money and don’t have the resources to pay off your debts, it can seem pretty tempting to start running in the other direction and never look back. If you think you can outsmart your creditors by hiding your assets and then declaring bankruptcy, here’s what you need to know before you pull any fast moves:
- Transferring assets or money to friends or family members right before declaring bankruptcy is considered fraud.
- Purchasing anything that isn’t essential to your survival, shortly before declaring bankruptcy can make you ilegible for bankruptcy proceedings–your case could get thrown out of court, meaning you’re obligated to pay everything you owe. Or, it could just mean your creditors get to nab all the things you just bought.
- Using your credit cards, lines of credit or any other form of credit before declaring bankruptcy is also considered fraud. You should cease using any and all credit as soon as you believe you will be declaring bankruptcy.
- Your individual retirement accounts are protected from creditors up to $1 million, and your workplace retirement funds have unlimited protection from creditors. Using these funds to pay off your debt is undesirable, unnecessary, and will cause you major financial setbacks over the long term, long after your bankruptcy has been cleared off your credit report. Leave those funds alone.
- Ultimately, you’ll want to consult a good bankruptcy lawyer and get clear about the laws in your state before you make any decisions or do anything with your money or assets.