Filing for bankruptcy can be a difficult decision, but it can also be the first step toward regaining financial freedom. Therefore, it is prudent to understand how things work and what you can do to make the most of the bankruptcy process.
An excellent starting point would be familiarizing yourself with the common pitfalls you may be susceptible to when filing for bankruptcy, as detailed below.
Failing to disclose all assets
Honesty is of the utmost importance when filing for bankruptcy. Failing to disclose your assets or misrepresenting facts can result in the bankruptcy case being dismissed or even criminal charges.
Bankruptcy trustees are experienced in finding hidden assets, so it’s best to be upfront and transparent about all assets, even if they may not seem significant.
Transferring assets before filing
Transferring assets before filing for bankruptcy can have serious ramifications. It is unlawful and can result in the dismissal of your bankruptcy bid. Additionally, the transferred assets may be subject to seizure by the bankruptcy trustee, and you could face criminal charges.
Running up credit cards debt before filing
Racking up debts before filing for bankruptcy because they will be discharged is not a good idea. It may be seen as fraud or abuse of the bankruptcy process and result in undesirable consequences.
Creditors have the right to challenge the discharge of debt incurred shortly before filing for bankruptcy, and you may have to repay debts incurred in bad faith.
Filing under the wrong chapter
There are several types of bankruptcy to choose from depending on your financial circumstances, and filing under the wrong chapter can have unintended effects. Generally, Chapter 7 bankruptcy is for individuals with little to no income or assets, while Chapter 13 bankruptcy is for those with a regular income who want to repay their debts over time.
Get the necessary help
The good news is that most of these and mistakes that could derail your efforts are avoidable if you have the proper guidance when filing for bankruptcy. Therefore, it is worthwhile to reach out for assistance to protect your interests and ensure a smooth process if you are contemplating bankruptcy.