If you have decided to file bankruptcy, or are seriously considering filing, it would be wise to be aware of certain issues in advance. One of the mistakes some clients make prior to filing bankruptcy is charging large items on their credit cards under the assumption that they will be discharged in bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 lowered the threshold on luxury purchases to $500 and extended the time period within which such spending is considered abuse of bankruptcy to ninety days prior to filing. Any purchases during this time are under particularly careful scrutiny.

Another thing not to do is liquidate your retirement account. Retirement accounts are usually considered exempt property in a bankruptcy regardless of which chapter you file. And if you withdraw your retirement funds early you will be liable for penalties and taxes which may not be discharged in bankruptcy.

You may be tempted to use your equity line of credit to pay off your debts. This is not a wise step to take before bankruptcy because under most state and federal law you are given the opportunity to claim an exemption for the equity in your home. Thus you may file bankruptcy and your equity will not be touched. So if you use your equity line to pay off debt, or take out a second mortgage, you may be converting debt which would have been discharged in bankruptcy into debt which you will still have to pay in order to keep your house. This obviously would not be a good idea.

If you have any questions and live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Golden, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, Colorado please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.