What should I avoid doing before filing bankruptcy?

Do not transfer assets to relatives, repay family loans, or run up credit cards. Trustees can claw back preferential payments (11 U.S.C. § 547) and fraudulent transfers (11 U.S.C. § 548), and recent luxury purchases and cash advances above statutory thresholds are presumed nondischargeable (11 U.S.C. § 523(a)(2)(C)).

Paying back a parent's loan creates a preference the trustee can recover from the parent; the lookback is 90 days for ordinary creditors and a full year for insiders (11 U.S.C. § 547). Putting the car in a sibling's name is a transfer the trustee can avoid, reaching back two years federally (11 U.S.C. § 548) and four under California's voidable transaction law. Charging purchases backfires too: luxury goods bought within 90 days of filing above the statutory threshold, and cash advances within 70 days, are presumed nondischargeable (11 U.S.C. § 523(a)(2)(C)). Draining retirement accounts is worse; qualified retirement funds are protected in bankruptcy, and cashing out converts a shielded asset into exposed cash plus a tax bill. The productive preparation: gather tax returns and six months of pay records, complete the required credit counseling (11 U.S.C. § 109(h)), keep paying secured debts on property you want to keep, and disclose everything; schedules are signed under penalty of perjury, and concealment costs the discharge.

Authority: 11 U.S.C. § 523(a)(2)(C)