Filing For Bankruptcy? Don't Make These Mistakes

6 December 2021
 Categories: Law, Blog

Are you considering bankruptcy to get you out of your financial troubles? If so, it will help to know some of the mistakes people make before they file. 

Forgetting To List Debts 

There is a lot of paperwork that needs to be filled out before you officially file for bankruptcy. Unfortunately, you can make a big mistake by not accurately filling out the paperwork. This is often due to forgetting to list everything that you owe when you list out all your debts. If your bankruptcy is approved, you can't just go back and add the debt to your filing. You would then be responsible for the debt and be stuck paying it. 

Hiding Assets

Don't assume that you can outsmart the bankruptcy court by hiding assets. Know that the assets that you own will be verified, and the court is trained to look for things that don't match up. For example, someone may try to transfer an asset to another person prior to filing for bankruptcy. This is not going to work, because the sale of that asset can be traced back to see who you sold it for and to how much. 

If you are caught hiding assets before filing for bankruptcy, know that it is considered a federal crime and you could face a serious punishment as a result. Always disclose the assets that you have and don't try to hide them.

Spending WIth The Intention to Discharge The Debt

While bankruptcy is designed to discharge debts that you cannot pay back, you cannot actively take on debts with the intention of not paying them back. This includes things like making purchases on a credit card, which is an unsecured form of debt that is often discharged in bankruptcy. 

The bankruptcy court will analyze your debt prior to filing for bankruptcy and will be able to see what are considered normal purchases and what are considered excessive. If they see you taking on more debt than usual prior to your filing, you could be denied the ability to discharge this debt and be responsible for paying it back in full. 

Paying Back Creditors Selectively

You may think that you are doing your best by paying back creditors prior to your bankruptcy filing. Unfortunately, this could be seen as you making preferential payments, which is not allowed. You must treat all creditors equally, and those preferential payments can be clawed back from your creditor and go toward paying off all your debts equally.

Want to avoid making mistakes when you file for bankruptcy? Make sure to work with a bankruptcy lawyer from the beginning of the process. 

For more information on bankruptcy, contact a bankruptcy attorney near you.