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Mistakes to Avoid when Considering Bankruptcy
Deciding to file bankruptcy is a tough decision that demands careful consideration and sound legal counsel. Just as you wouldn’t make a major investment without knowing all the ins and outs of how the investment is going to work for you, you shouldn’t file bankruptcy without knowing everything you can about the process and how it will affect your life. To help you prepare for filing bankruptcy, we’ve compiled a list of common mistakes people make that negatively impact their claim. If you’re considering bankruptcy, use the list below as a guide to avoid common mistakes people make in the bankruptcy filing process.1. Don’t run up credit card debt
Any debt incurred right before you file for bankruptcy may be challenged by creditors and determined to be non-dischargeable in bankruptcy court. Non-dischargeable debts are not cancelled in bankruptcy and you will still be responsible for paying creditors back these debts. When you decide to file bankruptcy, avoid using any credit cards for purchases or cash advances (transferring a balance is considered a cash advance) for at least 90 days before you file bankruptcy.
2. Don’t repay family members/friends
Friends and family must be treated like any other creditor. If you have made significant repayment to them in the year prior to filing bankruptcy, the bankruptcy trustee can reverse the repayment since you have given them preference over other creditors.
3. Don’t liquidate your retirement account
Pension money and retirement accounts are generally protected assets that cannot be affected by bankruptcy. By dipping into sheltered accounts, you are losing money that would otherwise be considered exempt from creditors.
4. Don’t transfer property out of your name
Any property that has your name on it, or had your name on it in the past couple years may be considered an asset that the bankruptcy court may try to seize. If you try to transfer property in an effort to frustrate your creditors, the bankruptcy trustee can seek to have the transfer invalidated.
5. Don’t take out a line of credit/2nd mortgage
If you are seriously considering bankruptcy anyway, borrowing money against your home could make your mortgage payments unreasonable. As a result, you may not be able to afford your mortgage payments and could lose the home you are trying to protect. Keep in mind that filing bankruptcy does not necessarily mean that you will lose your home.
6. Don’t miss your hearing
If you miss your hearing, your case may be dismissed and you will still be responsible for all your debt and all costs associated with the hearing.
7. Don’t ignore pending lawsuits
If a lawsuit has been filed against you, you have limited time to react. Ignoring pending lawsuits may allow your creditors to receive a judgment against you. If your creditor succeeds in getting a judgment against you, the debt is usually then considered secured debt and your creditor will receive a higher priority in your bankruptcy.
8. Don’t try to file bankruptcy on your own
Many who try to file bankruptcy on their own to avoid attorney fees end up paying more and losing more from misfiled forms and failure to properly exempt assets. A bankruptcy attorney is intimately acquainted with the bankruptcy code and can help make sure your assets are properly exempted so that you retain as much of your property as possible after bankruptcy.
9. Don’t wait too long to contact an attorney or withhold information from your attorney
You can avoid repossessions, wage garnishments and foreclosures by filing a bankruptcy claim before things get out of control. Contacting a bankruptcy attorney as soon as you start to feel pressure from your creditors can provide you with access to valuable information to help you protect your assets and get on the path to financial recovery. When you contact a bankruptcy attorney, do not hide any assets or debts from them. An attorney can only advise you and help you protect the things that they know about. Failure to be honest when filing bankruptcy can result in loss of the property you were trying to protect, denial of your bankruptcy claim, fines and imprisonment.
Considering bankruptcy can be a frightening experience as you anticipate impending loss and an uncertain financial future—but it doesn’t have to be. At the Cartwright Law Firm, you will receive the advice and experienced counsel you need during this difficult time. Our bankruptcy attorneys will take the time to compassionately listen to your specific needs and concerns and help you file a bankruptcy claim that best protects your assets. With our attention to detail and familiarity with the new bankruptcy code, we will make sure that you receive all exemptions available to you under law and that you receive the new beginning you deserve.
If you are overwhelmed by debt and can’t see a way out of your financial difficulties, call the Cartwright Law Firm to learn how you can get a fresh start. Contact us today at 248-352-8722 or toll free at 877-955-5400 for your free consultation.