People file for bankruptcy as a last measure to reduce the stress of debt and creditor’s pressure. It’s never an easy choice because it does have its fair share of repercussions. It’s not that uncommon for someone in such a situation to make mistakes while they are filing for bankruptcy.
A lot of people can feel hopeless and financially devastated during the process of filing. It’s important to understand that filing for bankruptcy can provide you with the needed relief to turn a new financial page, but there are some mistakes that can make the process more confusing and harder than it should be. To make this process more straightforward, we’ve created a list of the most common mistakes that you want to make sure to avoid when filing for bankruptcy.
Filing for Bankruptcy Too Early
While bankruptcy can sometimes be the only way out of getting some relief from crushing debt, it may not always be the best option for cases where certain alternatives exist. This is why it’s often recommended to consult a bankruptcy lawyer who can help you figure out if there are other ways to try to settle your debt before filing for bankruptcy. Whether it's debt consolidation or negotiating settlements with a creditor, your financial status will play a big role in determining your best course of action.
Concealing Assets
Filing for bankruptcy is a very serious legal process that often gets put under the microscope for any illegal scrutiny that can unhinge the fairness of the process. It’s not uncommon for some people to do their best to conceal their assets before filing for bankruptcy to try to retain them after the court’s order. Whether it’s by giving it to a friend or family member, it’s much easier than you think for the court to find out. Keep in mind that doing so won’t just paint you in a bad light, but it can also be illegal in locations like San Diego or California, in general. As mentioned on https://tlbrownlaw.com/practices/bankruptcy-attorney/, a good bankruptcy lawyer can help you be discharged without losing any assets. Take the time to find the best attorney to make sure everything is in order. Aside from denying the bankruptcy application, there can be serious legal repercussions to hiding assets, such as fines and jail time.
Honesty is not optional when you’re filing for bankruptcy. Your accounts and assets will be under close scrutiny, leaving little room for maneuvers that can easily be tracked. You need to honestly list all your assets, whether it is your home, vehicle, bank funds, and others. The court will also demand to know each and every debt, failing to disclose debts to a creditor will be easily discovered as the case progresses further. The last thing you want is to be under suspicion for attempting to commit fraud. A bankruptcy lawyer should help you disclose all the assets you have to ensure that nothing is missing from the necessary paperwork.
Filing Under the Wrong Chapter
The most common types of bankruptcy chapters that individuals and businesses file are Chapter 7 and Chapter 13. A lot of people are under the wrong impression that they aren’t very different, but that’s far from the truth. Filing under the wrong chapter can make it much harder to obtain the debt-relief you’ve been looking for. A common mistake is filing under Chapter 13 instead of 7, which often entails the repayment of the majority of debt over a longer timeline and without the sale of most assets. Chapter 7 can be quicker to relieve debt but it also involves selling the majority of owned assets. It might be a good idea to have a bankruptcy lawyer take a look at your finances to help you settle on the best one for you.
Favouring Payment of Certain Debts over Others
When you own debt to multiple creditors, you’re probably inclined to pay some before others, depending on the urgency or whether they provide a service. You might want to keep in mind that this can be quite harmful for your bankruptcy application. The main concept behind filing for bankruptcy is to prove that you’re not able to pay your creditors the debt you owe. Paying some creditors while ignoring other debts is known as ‘preferential payment’, which is against the treatment of all creditors fairly, making it hard to make a case for your need of filing for bankruptcy. It will be used against you in the court because it is considered evidence that you had the ability to pay some of your debts, so your claim to not be able to pay can be weakened. The bankruptcy court has the authority to reverse the preferential payment and distribute it across creditors, setting you back a bit.
Clearing Out Funds
For the bankruptcy filing to be properly looked into, the court must be able to find a traceable route of income and funding, such as a job or a business. It’s very important to ensure that your business and personal accounts are completely separated if you own a business. A serious mistake that some individuals make is transferring money from a business account to a personal one, thinking it would protect the funds. This move raises a lot of questions and will make the court suspicious of your source of income, which is one of the foundations of the case.
Finishing the Financial Management Course
Many people may not realize that the credit counseling course is a mandatory requirement to successfully file for bankruptcy. The course is provided by a credit counseling agency that’s been officially approved by the US Trustee. Another course is required to be taken before the court’s approval of your case. Personal financial management courses are also provided by credit counseling agencies and they are required if you want to receive your discharge. Most of the time, taking the personal financial management course as soon as possible merits good results, but an attorney may have another view in specific circumstances.
No matter how hard bankruptcy may seem, it can still be used to your advantage if you are in a tight spot. It’s highly recommended to be consulting your bankruptcy attorney every step of the way to ensure your paperwork and legal course of action are spotless. Bouncing back from bankruptcy is almost always easier than you’d think if you do it right.
