Deciding to file for bankruptcy is a big step. But what you do before you file matters just as much as the filing itself. Some actions can jeopardize your case, delay your discharge, or even lead to criminal penalties.
If you are considering bankruptcy in Florida, here are five critical mistakes to avoid — and what to do instead. Also consider how federal vs. state bankruptcy laws affect your exemptions and what you keep.
Mistake 1: Racking Up New Debt
It can be tempting to use your credit cards one last time before filing, especially if you are already struggling to pay bills. But this is one of the most dangerous things you can do before bankruptcy.
After you file, the bankruptcy trustee reviews your credit card activity in the months leading up to filing. Creditors do the same. If they find that you made charges without intending to pay them back, they can object to your discharge for those debts.
What the Trustee Looks For
Under federal bankruptcy law (11 U.S.C. § 523), certain debts are automatically non-dischargeable if they fall within specific timeframes:
- Luxury purchases made within 90 days before filing are presumed non-dischargeable
- Cash advances made within 70 days before filing are presumed non-dischargeable
The exact dollar thresholds are adjusted periodically for inflation and a judge has discretion to determine what constitutes an excessive purchase regardless of the dollar amount. Consult with your attorney for the current thresholds and how they apply to your situation.
Examples of problematic behavior:
- Maxing out credit cards right before filing
- Taking cash advances to “stock up” on cash
- Opening new credit accounts
- Buying luxury items you cannot afford
The trustee can also look back further than 90 days. If there is a pattern of reckless spending over a longer period, creditors may challenge those debts individually.
Mistake 2: Not Filing Your Taxes
Bankruptcy courts require your tax returns. They use them to verify your income, expenses, and ability to repay debts. If you have not filed your taxes, you cannot complete your bankruptcy paperwork — and the court may dismiss your case.
Why Tax Returns Matter
- Chapter 7: The trustee uses your tax returns to verify that you pass the means test
- Chapter 13: Your tax returns determine your disposable income and repayment plan amount
- Both: The trustee may request copies of your last two to four years of tax returns
If you owe back taxes, do not panic. Many tax debts are non-dischargeable anyway, but some can be addressed through bankruptcy. A qualified bankruptcy attorney can review your situation and explain your options.
Mistake 3: Moving or Hiding Assets
This is the mistake that carries the most severe consequences. Transferring property, selling assets below market value, or hiding assets before filing can result in:
- Denial of your bankruptcy discharge — the court can refuse to wipe out your debts
- Dismissal of your case — you lose the protection of the automatic stay
- Criminal penalties — bankruptcy fraud is a federal crime punishable by up to five years in prison
What Counts as Hiding Assets
- Transferring property to a family member or friend
- Selling assets for less than fair market value
- Not listing all bank accounts on your bankruptcy paperwork
- Burying money in a safe deposit box or hiding cash
- Putting assets in someone else’s name
The bankruptcy trustee has broad investigative powers. They can subpoena bank records, review financial transactions, and examine your asset history. If you are trying to hide something, they will likely find it.
What to Do Instead
Florida has generous homestead exemptions that protect your primary residence from creditors. In most cases, you can keep your home. Other exemptions protect your car, retirement accounts, and personal property. An experienced bankruptcy attorney can help you maximize your exemptions and protect what matters most.
Mistake 4: Selectively Repaying Loans
If you paid back certain debts before filing — especially to family members or friends — you need to disclose this in your bankruptcy paperwork. The trustee may view these as preferential transfers and attempt to claw the money back.
How Preferential Transfers Work
Under 11 U.S.C. § 547, the trustee can avoid (reverse) transfers made to creditors within 90 days before filing (or one year for insiders like family members) if:
- The transfer was made on or about the time the debt was incurred
- The creditor received more than they would in a Chapter 7 liquidation
- You were insolvent at the time of the transfer
Example: You owe $5,000 to a credit card and $3,000 to your sister. Before filing, you pay your sister $3,000 but do not pay the credit card. The trustee can recover that $3,000 from your sister because she received a larger share than she would in liquidation.
What to Do Instead
Do not try to “clean up” your finances before filing. List every debt, every payment, and every transfer. Transparency protects you. If you have already made preferential payments, your attorney can advise on how to handle the disclosure.
Mistake 5: Ignoring Pending Legal Actions
If creditors are suing you, garnishing your wages, or foreclosing on your home, it is tempting to ignore the situation. But ignoring legal actions makes things worse.
Why You Should Not Ignore Lawsuits
- Default judgments. If you do not respond to a lawsuit, the creditor wins automatically. This creates a judgment that can lead to wage garnishment and bank levies.
- Foreclosure. If you are behind on your mortgage, ignoring the foreclosure process can result in losing your home. The automatic stay from bankruptcy can stop foreclosure, but only if you file in time.
- Accelerating deadlines. Some legal actions have strict response deadlines. Missing them can waive your rights.
What to Do Instead
Let your creditors know you are planning to file for bankruptcy and ask them to direct future communications to your attorney. This buys you time and protects your rights. If you are facing foreclosure, consult a bankruptcy attorney immediately — the automatic stay can stop the process, but timing matters.
What to Do Instead: A Pre-Filing Checklist
If you are planning to file for bankruptcy, here is what you should do:
- Stop using credit cards — especially for non-essential purchases
- File your tax returns — get current before filing
- Do not move or hide assets — Florida exemptions protect most property
- Do not repay select creditors — list all debts equally
- Respond to legal actions — or let your attorney handle them
- Gather financial documents — pay stubs, tax returns, bank statements, loan documents
- Consult a bankruptcy attorney — the earlier you get legal advice, the more options you have
Talk to a Florida Bankruptcy Attorney
The decisions you make before filing for bankruptcy can determine whether your case succeeds or fails. The Dellutri Law Group has decades of experience helping Florida consumers navigate the bankruptcy process — from pre-filing preparation to discharge and beyond.
Call us at 239-939-0900 or schedule a free consultation to discuss your situation. We serve clients in Fort Myers, Naples, Port Charlotte, Tampa, and throughout Florida.
Do not let mistakes before filing cost you a fresh financial start. We are here to help.
