You work hard every day to keep your finances in order, but life is full of unexpected turns. When living under the shadow of financial hardship, you may begin to consider bankruptcy. Most people know that bankruptcy is a legal process that helps grant relief from debt, but that’s where their familiarity ends.
There are steps to preparing to file bankruptcy, including things you shouldn’t do before filing.
We’re going to cover what you should do when preparing to file.
Common Mistakes to Avoid When Preparing to File Bankruptcy
Bankruptcy is an effective way to address debt that’s gotten out of control. However, you can only receive a bankruptcy discharge every so often. So it’s a good idea to examine whether now is the time or if you need to file in the future.
There are two forms of bankruptcy available, Chapter 7 and Chapter 13. You can only try to file for bankruptcy once every eight years. If you file a Chapter 13, this number is lowered to six years. This means you should wait until your finances stabilize to avoid falling into financial difficulty again after filing.
● Don’t Delay Filing for Too Long: While you should take care not to act hastily, you don’t want to miss the right time either. If your wages are being garnished for a debt, bankruptcy can stop it. Lawsuits from creditors can also be resolved, but it’s best to file before your case goes to judgment. Judgment liens can be difficult to discharge during bankruptcy, so it’s best to file first.
● Don’t Dip into Your Retirement: If you’ve considered dipping into your retirement funds to ease your financial difficulties, don’t. These resources can generally be protected as part of the bankruptcy process.
● Don’t Leave Anything Out: It’s important to be thorough, accurate, and honest about the information you provide during bankruptcy. Failure to provide the necessary information could put you at risk of fraud charges, resulting in large fines or jail time. An incomplete filing will be discharged or result in fees for having to file the correct paperwork. Most importantly, any assets not listed in the bankruptcy schedule will not be protected from debtors.
● Don’t Add to Your Debt Before Filing: New debt accumulated in the three months before filing can raise questions about fraud. Cash advances or purchases for things other than life necessities can be grounds for presumptive fraud allegations. This can result in your being unable to discharge the debt.
● Don’t Rearrange Your Assets: You’ll want to make as few changes as possible regarding your finances before filing. Moving money or selling any assets can be grounds for criminal penalties if done before filing bankruptcy. While selling assets can be acceptable to cover expenses such as food, rent, or utilities, it’s best to avoid it if possible.
The bankruptcy process is a transparent one. While assets necessary for maintaining a household can be exempted, everything else is at risk to your creditors. Benefiting from the bankruptcy process requires being thorough and transparent about your finances. Every aspect of your finances over the past ten years will be thoroughly examined before your bankruptcy is completed.
Don’t Try to Handle Bankruptcy on Your Own
When you’ve decided to consider bankruptcy to resolve financial hardship, it’s time to call a bankruptcy attorney. They will help you navigate all the stages of the process and ensure that nothing gets left out. When you’ve been struggling with financial hardship, filing for bankruptcy can bring you peace of mind. It can be an effective way to restore financial stability and set the foundation for a future free of financial stress.
Reach out to Hines Law Offices located throughout the Greater Boston area for bankruptcy assistance. We are a full-service bankruptcy firm that has been providing debt solutions to individuals for more than twenty years. It just takes a phone call and a Free Consultation to see if filing for bankruptcy is the right path for you.