Bankruptcy can be scary. It can also be complicated. Deciding to file for bankruptcy is a big step and will help you get back on your feet financially. But it can also come back to bite you if you make avoidable mistakes. Some of them may be tempting, but the point of bankruptcy is to help you, not punish you, so you need to make sure you don’t inadvertently make it worse for yourself by making common and completely avoidable mistakes.
From lying on forms, to going in blind without legal help, to running up your debt on credit cards, there are many mistakes you can make that will hinder your ability to make the most of your bankruptcy case.
Below are just a few of the mistakes you’ll want to avoid when filing for bankruptcy. They’re among the most common and, oftentimes, the most tempting. But don’t give into it. Don’t make these mistakes while trying to restart your life.
Lying About Your Assets
If you’re filing for Chapter 7 you’ll have to be under a certain threshold of income in order to qualify. If you make more than the threshold, you’ll be determined capable of paying off your creditors and unable to file for Chapter 7 which is designed for those who don’t have the financial means to pay off their debts. So, “forgetting” an asset, either on purpose or by accident, can be costly in this stage. The consequences for this could be a dismissal of your case and being banned from filing for those particular debts again. In short, you’ll find yourself in a deeper hole if you leave assets off your forms.
Dipping into Your 401(k)
It’s tempting when you’ve amassed a large amount of retirement money just sitting there not doing anything except growing. But taking money from your 401(k) or other retirement plans to pay off debts will only hurt you. The first problem is that, after you’ve filed for bankruptcy, you’re legally obligated to pay off all creditors equally, you can’t favor one over the other. So using the 401(k) to attempt to chip away at some debt is, technically, illegal. There is also the problem of your 401(k) and other investment money being exempt from bankruptcy, which means it won’t be touched during the process–unless you’re dipping into it for funds.
Not Seeking Legal Advice
Bankruptcy is complicated. And many issues or mistakes that arise come up by accident because you didn’t seek proper advice. Do yourself a favor and get the legal advice you need to move forward before you make a costly mistake that could have been avoided with the right legal help. Seek out an experienced and knowledgeable bankruptcy attorney near you.
Can I Loan Out Property to Avoid Losing It?
This is a common tactic people will take in order to maintain possession of the property while assets are being surrendered for debt collection. People will loan out property or money to relatives with the understanding that they’ll take it back once the bankruptcy process is over to avoid having to surrender it. That’s dishonest, and if it’s something legally in your name (like a car), you can’t get out of it that easy. This is also considered illegal by many and, if it’s proven that you attempted to transfer ownership of property prior to filing, you’ll find yourself in hot water.
Is It Illegal to Run Up Credit Card Debt During Bankruptcy?
Any credit card purchases made within 90 days of filing for bankruptcy will not be considered as part of the bankruptcy debt. So once you pay off your debt, you’ll still owe the credit card companies money. It’s tempting for people to run up credit card debt when they know they’re about to file for bankruptcy thinking they can get freebies out of it, but the creditors and courts are familiar with this trick and it will only hurt you.
The bottom line is that bankruptcy is designed to help you pay off your debt. For some, it can be embarrassing, costly, and complicated, but you don’t want to make it worse with dumb mistakes or dishonesty. Tell the truth, take legal advice where you can, and own up to what you owe to make the process as painless as possible.
At Hines Law, serving the greater Boston area, we acknowledge that personal bankruptcy situations are complicated, confusing, and many times difficult to embrace. Frequently, the results of these circumstances impact you as well as your loved ones for the rest of your lives. Our bankruptcy attorneys specialize in Chapter 7 and Chapter 13 filing. Deciding which is the right choice for you depends on your debts, assets, and your income. Hines Law is a full-service bankruptcy firm located throughout Massachusetts that can help guide you through the process so that you avoid problems and benefit the full protection you deserve. Call today for a Free Case Evaluation!