10 Mistakes To Avoid When Considering a Personal Bankruptcy
If you have debts you can’t afford, filing for bankruptcy could provide you with a new lease on life. Personal bankruptcy is the solution that many people need, and going through the process doesn’t have to be costly, time-consuming or stressful. Hiring a bankruptcy lawyer will save you money in the long term, and you can rely on your lawyer to ensure that the process is as efficient and smooth as possible.
Additionally, while many people worry about the stigma of filing for bankruptcy, the reality is that no one you know is likely to find out about your bankruptcy—unless you tell them. When filing for bankruptcy makes sense, there are few downsides, and getting out from under your debt can give you the fresh start you need and deserve.
Considering a Personal Bankruptcy? Don’t Make These 10 Mistakes
If you are considering a personal bankruptcy, it is important to make smart decisions. If you don’t make smart decisions, this could limit (if not eliminate) the benefits of filing for bankruptcy. For example, here are 10 mistakes you need to avoid:
1. Racking Up More Debt
If you are thinking about filing for bankruptcy, now is not the time to rack up more debt. Many people make the mistake of assuming that they can take on debt, file for bankruptcy and then avoid paying the bills they just incurred. Not only isn’t the case, but it can also lead to accusations of bankruptcy fraud. If you truly need to take on more debt (for example, if you need a medical procedure), it is best to discuss your situation with a bankruptcy lawyer as soon as possible.
2. Maxing Out Your Credit Cards
Not racking up more debt means not maxing out your credit cards. If you go on a spending spree right before you file for bankruptcy, the judge isn’t going to be happy. Using your credit cards when you have no intention of paying your bills isn’t allowed, and it can lead to a denial of bankruptcy protection.
3. Transferring Money to Friends or Family Members
Depending on the type of personal bankruptcy you choose, you may have to use some of your assets to pay off some of your debts. But, it is also very possible that all of your assets could be exempt from the bankruptcy process. In any case, you should not try to avoid liquidation by transferring assets to friends or family members. This isn’t allowed either; and, in addition to imposing other consequences, the bankruptcy court will simply take back the assets and put them in your bankruptcy estate.
4. Withdrawing Money from Your Accounts
Just as you shouldn’t try to transfer your assets to others, you also shouldn’t withdraw money from your accounts in the hopes of hiding the cash (or using it for unnecessary purchases). The bankruptcy court will find out, and this will lead to problems that you could—and should—have avoided.
5. Paying Off Some of Your Debts
While paying off some of your debts might seem like the right thing to do, this can actually lead to problems as well. In some cases, paying off a creditor before filing for bankruptcy can be classified as an improper “preferential transfer.” While you can pay your ordinary bills—and you generally should if you can—you should consult with a lawyer before making any unusual debt payments pre-bankruptcy.
6. Waiting Too Long to File for Bankruptcy
If it makes sense for you to file for personal bankruptcy, you will most likely want to file right away. Waiting too long can have a variety of negative consequences, especially if it means that you are going further into debt. The longer you wait, the greater your risk of facing wage garnishment, repossession or other collection efforts. Once you file for bankruptcy, the “automatic stay” means that your creditors are prohibited from taking these types of actions against you.
7. Misunderstanding the Benefits of a Personal Bankruptcy
While filing for bankruptcy affords numerous benefits under the right circumstances, it is important to make sure that you are not misunderstanding the benefits of bankruptcy. For example, while many types of debts can be eliminated through the bankruptcy process, some cannot. If you have debts that are ineligible for discharge, this is something you need to know. An experienced bankruptcy lawyer can help you accurately understand the benefits of filing for bankruptcy based on your financial circumstances.
8. Randomly Choosing Chapter 7 or Chapter 13
If you start looking online for information about the differences between Chapter 7 and Chapter 13, you can easily start to feel overwhelmed. But, this does not mean that you should give up and randomly choose one or the other. Chapter 7 and Chapter 13 have different eligibility criteria, and filing under each chapter affords different benefits. As a result, it is critical that you make an informed decision.
9. Failing to Consider Your Alternatives
Making informed decisions also means weighing your alternatives. While filing for bankruptcy is the best solution in many scenarios, it will make sense to pursue a bankruptcy alternative in some cases.
10. Trying to File for Bankruptcy Without a Lawyer
Finally, given all of the various and complicated issues involved in pursuing personal bankruptcy, it is important to have an experienced lawyer on your side. When you hire a bankruptcy lawyer, your lawyer will help you evaluate all of your options, explain the differences between Chapter 7 and Chapter 13, and handle all of the necessary paperwork on your behalf. Avoiding mistakes before you file for bankruptcy is just the beginning. There are just as many mistakes—if not more—that you need to avoid after you file as well.
Schedule a Free Consultation with Bankruptcy Lawyer Georgette Miller
Are you interested in learning more about your personal bankruptcy options? If so, we invite you to get in touch. To schedule a free consultation with bankruptcy lawyer Georgette Miller, please call 866-964-6529 or request an appointment online today.