Seven Bankruptcy Mistakes to Avoid

If you are struggling financially, bankruptcy can be a wonderful opportunity for relief. But filing for bankruptcy can be difficult, and to help you achieve the best results for your future, here are several mistakes to avoid:

Putting off the problem until it’s too late

If you are in danger of losing your house or your car, don’t delay. It’s better to address your financial challenges sooner rather than later. It’s to your benefit to contact a lawyer early and to make sure you have all bases covered. Your best chance at avoiding losing property is to know your options early in the game.

Using secured debt to pay off unsecured debt

Taking out debt like a home equity loan and using it to pay off credit cards is often a bad idea. If you can’t make the payments on the home equity loan, your house is at risk, which is arguably a bigger loss than you would face as a result of unpaid credit card debt.

Running up credit card debt before filing for bankruptcy

It looks suspicious to bankruptcy trustees when someone makes lots of big-ticket purchases and then files for bankruptcy. Purchases made within six months or so of filing are going to be carefully scrutinized. It’s even possible to be charged with fraud.

Giving away property

Another activity that looks very suspicious to bankruptcy trustees is giving away property before filing for bankruptcy. Any transfers for a period of two years before bankruptcy is filed are going to be carefully scrutinized. In extreme cases giving away property may even lead to criminal charges. You may have assets that were legitimately transferred for business reasons; be sure to disclose these.

Transferring debt from high interest to low interest credit cards

Under normal circumstances this may be a great idea, but it’s subject to the same kind of suspicion as running up credit card debt before filing for bankruptcy. This will be scrutinized like any other cash advance or purchase if the transfer is made within 90 days of filing.

Repaying loans from family members

Unfortunately, if you’ve borrowed money from family members, immediately before filing for bankruptcy is not a good time to repay them. Family members shouldn’t have preference over other creditors, and the bankruptcy trustee may reverse the payments.

Withholding information from your lawyer

Sometimes it’s tempting to hide an asset from everyone, including your lawyer. This is playing a dangerous game. Not being honest with your lawyer can translate to losing assets, having your case dismissed, or even facing criminal charges. To get the best possible outcome, it’s important to be honest with your lawyer about every aspect of your financial situation.

If you’re facing bankruptcy, we can help. Please get in touch with us today to learn more!