Common Bankruptcy Questions?
Should I continue to make Monthly Payments?
You should only make payment on large financed purchases that you intend to keep after you file for bankruptcy.
Should I use my retirement accounts to pay bills?
NO. 401k, IRA, and ERISA retirement accounts are exempt and fall outside of the bankruptcy estate. Moreover, early withdrawal could render you ineligible to file for bankruptcy on the basis of increased income.
Should I Take out a Home Equity Loan to pay Bills?
Generally NO. In Michigan, you will be able to claim a minimum of $3,500 equity in your home as exempt. This means you can go through bankruptcy, and the court will not use $3,500 of the value in your home to pay your creditors. Also, if you take out a second mortgage / home equity loan, you could be turning the non-secure debts that you pay off, into debt that will then be secured by your home. In other words, debt that would have been discharged by the bankruptcy court, will be lumped into your mortgage and you will have to pay it back.
Should I convey property to a friend or relative?
The bankruptcy court will scrutinize conveyances made at less than market value. Furthermore, the court will want to see that the proceeds from such a sale have gone to pay your creditors and necessary living expenses.
Should I transfer property to a friend so the court will not sell it?
NO. This is fraud. There is a 5 Year / $500,000 fine for this type of conduct. The least of your worries will be that your debts will not be discharged.
Should I pay back relatives and friends who have lent me money?
You may, however, do not pay back $600 or more. In the eyes of the Bankruptcy court, friends and relatives are considered "insiders" who have cut in line, or rather, have been given a "preference" (by you) to be paid first before other creditors who may have priority (to be paid) before the insider you have paid. The bankruptcy court trustee may recover this type of payment from your friend or relative and divide the payment amongst your creditors.