If you are one of the many Americans struggling with massive amounts of debt, you may be considering filing for bankruptcy. It can get rid of most of your unsecured debts and help you get a fresh financial start. However, many people don’t educate themselves properly about the bankruptcy process and end up making costly mistakes.
Here are some common mistakes you should avoid making when filing for bankruptcy.
Going on a Spending Spree
Some people decide to go on a spending spree before filing for bankruptcy because they believe it will all be discharged. While it may be tempting to buy yourself a new outfit or that big screen television you’ve always wanted, don’t make any big purchases before filing for bankruptcy. Generally, credit card purchases made within 90 days of filing for bankruptcy can’t be discharged. That means you will be left responsible for paying back that money.
Hiding Assets
When you file for bankruptcy, you’re required by law to list all the assets you have. If you attempt to hide any assets, no matter how small they might seem, it could jeopardize your chances of a successful bankruptcy and also result in criminal charges.
Repaying Friends and Family
If you’ve borrowed money from friends or family to get through a tough financial time, you may be eager to pay them back. However, it could actually be detrimental to do this after filing for bankruptcy. If you pay them back, the bankruptcy trustee could force them to pay back money to the trustee, which will then be redistributed to your creditors.
Transferring Property
In bankruptcy, some assets have to be liquidated to repay certain creditors. That’s why some people try to transfer property out of their name and into a relative’s name. However, this can backfire. The trustee may still be able to take the property from the person it was transferred to or the one who transferred it.
Filing the Wrong Chapter
There are two types of bankruptcy: Chapter 7 and Chapter 13. The option you choose will depend on your unique financial situation. For example, if you still have a good-paying job and want to keep your home, Chapter 13 may be best. If you have a very low income or no assets, Chapter 7 might be the better option. Choosing the wrong option could lead to consequences.
Not Hiring a Bankruptcy Lawyer
Bankruptcy law is quite complex, so it’s not something you should go through on your own. If you don’t understand some of the terminology in the paperwork and make a mistake, it could jeopardize your case. An experienced bankruptcy lawyer can guide you through the process and look out for your best interests.
Contact a bankruptcy lawyer today to schedule a consultation.
