Mistakes You Should Avoid When Filing for Bankruptcy According to a Bankruptcy Lawyer

Choosing to file for bankruptcy can feel like you’re making a bad decision. With how it can affect your credit score and become a stain on your credit history, you might feel like you can find another way out. While it can certainly be a major decision, it can be a valuable lifeline to help you rearrange your finances and pay off your creditors. Before you can make this decision, you should look into some of the most common bankruptcy filing mistakes that people make. 

Mistakes You Need to Avoid 

Filing for bankruptcy can be a little complicated and requires help from a professional bankruptcy lawyer. In fact, if you’re not careful, you could end up making mistakes that could end up costing you a lot more in the long run. Some of the mistakes that you should try your best to avoid can include the following:

Accumulating More Debt After You Considered Bankruptcy

An unfortunately common mistake that individuals will make if they have finally come to the decision to file for bankruptcy is that they will continue to take on more debt. After you have started filing for bankruptcy or are even just considering it, you should avoid charging up credit cards or taking up payday loans. 

You should always remember that your credit history will be heavily scrutinized when you apply for bankruptcy. If trustees look into your credit history and see that you are taking up credit that you have no intention of paying back, then you could possibly face a criminal charge. 

Refusing to File Because of Its Effects on Debt

People will usually avoid filing for bankruptcy for the serious side effects that it can have on their credit score. Even though these side effects are worth considering when you’re deciding to file for bankruptcy, you should also carefully weigh your options. True, you could lose a lot of your personal assets and have bankruptcy be part of your credit report, but you will still be getting a clean slate to start over. 

Hitting the reset button on our credit history can be a great way to move on from any prior decisions that led to you accumulating that debt in the first place. 

Taking Too Long To File 

Another mistake that many people will usually make when filing for bankruptcy is that they will take too long to take the recommended steps. If you wait for too long before filing for bankruptcy, you could end up losing a lot more money or end up in a much more difficult situation. 

For instance, if a creditor is suing you, then it is very likely that they can seize your wages or other valuable assets that you have. Waiting too long to file for bankruptcy in this situation means that you might need to take out more loans for day-to-day expenses.

Not Filing Under The Right Chapter

Possibly, one of the most common mistakes that individuals make when they’re filing for bankruptcy is that they file in the wrong chapter. Not only are the conditions for each of these chapters completely different, but filing under the wrong one also means that instead of getting relief from your debt, you could restructure it. 

Chapter 7 is the bankruptcy chapter that can give you significant relief from your current debts, whereas Chapter 13 is only useful when you’re looking to rearrange your debts. If you accidentally file for Chapter 13, not only will this last a longer time, but you will also have to pay all of your creditors back. It’s important that you get in touch with a bankruptcy lawyer before you go about making any decisions. 

Filing Before Receiving Valuable Assets

While filing for bankruptcy can be a valuable lifeline for people who are struggling with their debts, doing so just before you get valuable assets is not a wise decision. Whether it’s your inheritance or dividends from stock options, you should see when you are likely to receive this money. You can then use these assets to pay off your debts at your convenience without having to file Chapter 7 bankruptcy. Or, you could even file for Chapter 13 instead, which has a much less serious impact on your credit rating. You have a lot of options to consider when looking into how you can adjust your financial situation, which is why you should discuss these assets with a bankruptcy attorney as well. 

Taking Out From Your Retirement Funds

People who are often desperate to pay back the creditors will sometimes take out money from savings or retirement funds. While this might sound like a good strategy in the short term, in the long run, there is a lot more that you have to consider. In the short run, you can pay back a lot of your creditors. 

But in the long run, you might find it difficult to build back the money from your savings or retirement funds. It is also likely that you will have to incur serious fines for taking out money from these accounts early. 

Retirement funds and other types of savings accounts are protected in all bankruptcy filings. But if you take out that money, a bankruptcy trustee will make it part of your repayment strategy. 

Not Revealing All Your Assets

This is possibly the biggest mistakes that individuals make when they’re filing for bankruptcy, as they try to hide assets using various methods. Whether you are trying to hide physical assets like gold or transferring ownership of assets to friends and family before filing, these practices are not advised. If the courts find andy suspicious transactions or see that the money doesn’t add up, it could be considered fraudulent activity. 

Not Working With An Experienced Bankruptcy Attorney

An experienced bankruptcy lawyer can help you through this difficult journey to filing for bankruptcy. Not only do they offer you proper advice on your specific situation, but they can also help you avoid making some of the mistakes that you are likely to make, like the ones mentioned in this list. Even if you are just thinking things through and are getting all of your financial information in order, talking to a bankruptcy attorney can really help put your financial situation into focus and how you should proceed. 

Conclusion 

When considering whether you should file for bankruptcy, it can sometimes feel like you don’t have any good options left. While this is rarely the case, you can get better guidance from a successful bankruptcy lawyer.