Every year, millions of people across the country declare bankruptcy. If you’re considering this step, working with a bankruptcy relief company is essential to ensure a smooth process. Winterbotham Parham Teeple, a PC can help you avoid common pitfalls that many people face before filing.

Read on to learn about these mistakes, and contact us at 800.400.9000 for your free consultation with a bankruptcy lawyer in Valencia, CA.

Don’t Take on New Debt

One of the biggest mistakes people make before declaring bankruptcy is taking on new debt. Doing so right before filing can appear fraudulent to the bankruptcy judge. They will scrutinize the amount and timing of any new debt, whether it’s from credit cards, additional loans, or cash advances. They’ll also consider if the debt was for luxury purchases or necessary expenses. Avoid risking your bankruptcy discharge by making unnecessary purchases.

Don’t Borrow Money Against Your Home

Taking out a loan against your home to pay off unsecured debt, such as credit card debt, is not advisable. In a California bankruptcy, you can claim up to $175,000 of your home’s equity as exempt, depending on your marital status, age, and health. Borrowing against your home could jeopardize this exemption. Speak with a bankruptcy attorney in Valencia, CA, by calling 800.400.9000 to learn more about protecting your home equity.

Don’t Take Money Out of Your Retirement Plans

Retirement plans are often fully exempt from liquidation in a California bankruptcy. Therefore, it’s generally a bad idea to withdraw money from your retirement accounts, such as IRAs or 401(k)s, before filing for bankruptcy. Doing so can unnecessarily deplete your retirement savings and may not provide the financial relief you need. Consult with a bankruptcy lawyer in Valencia, CA, to understand your retirement fund protections.

Don’t Pay Back Family or Friends Right Before You File

It’s common for people in debt to borrow money from friends or family and feel compelled to repay them before filing for bankruptcy. However, if you repay personal loans within one year of filing, these payments can be considered preference transfers. This can lead to lawsuits against your friends and family. To avoid this, seek advice from a bankruptcy attorney to understand the implications of repaying personal loans before filing.

Don’t Overlook California Bankruptcy Exemptions

There are various exemptions in California bankruptcy law that protect certain property from unsecured creditors. Failing to review and utilize these exemptions can result in losing assets unnecessarily. Navigating the numerous exemption options can be challenging, but a bankruptcy attorney can help you identify and apply the exemptions you qualify for, ensuring you retain as much of your property as possible.

Get Expert Advice from a Bankruptcy Lawyer in Valencia, CA

If you’re ready to move forward with bankruptcy but are unsure about the next steps, or if you’re still weighing your options between Chapter 7 and Chapter 13 bankruptcy, now is the time to seek professional guidance. Contact Winterbotham Parham Teeple, a PC at 800.400.9000 for a free consultation. Our experienced team can help you understand your options and avoid common mistakes, ensuring a smoother bankruptcy process.