Failing To Accurately List All Debts & Assets
Failing To Accurately List All Debts & Assets
Debts And Bankruptcy
One of the most critical mistakes to avoid when filing for bankruptcy is failing to accurately list all your debts and assets. When you file for bankruptcy, you are required to disclose your complete financial situation, including every debt you owe and all the assets you own. This includes not only the obvious things like credit card debt and your home, but also smaller debts, such as personal loans from friends or family, and less obvious assets, such as valuable collectibles or an inheritance you expect to receive.
Omitting any debt or asset, whether intentional or by accident, can lead to serious consequences. The bankruptcy court may dismiss your case, or you could even face allegations of fraud. It’s crucial to take the time to carefully review all your financial information and make sure everything is included in your bankruptcy petition.
Incurring New Debt Before Filing
Another common mistake people make is incurring new debt just before filing for bankruptcy. It might be tempting to use your credit cards to make large purchases or take out loans before filing, especially if you’re struggling financially. However, this can backfire in a big way. The court may view recent large purchases or cash advances as fraudulent, particularly if they occurred within 90 days of filing for bankruptcy.
If the court determines that you took on new debt with no intention of repaying it, they could deny the discharge of that debt, meaning you’ll still be responsible for paying it off even after bankruptcy. To avoid this pitfall, it’s wise to stop using credit altogether once you’ve decided to pursue bankruptcy.
Transferring Assets To Friends Or Family
In an attempt to protect their property, some people transfer assets to friends or family members before filing for bankruptcy. This is a big mistake. The bankruptcy trustee, who is responsible for overseeing your case, has the authority to reverse any transfers of property that were made in the months leading up to your bankruptcy filing. This includes gifts, sales, or transfers of assets to family members, friends, or business associates.
These actions can be seen as an attempt to hide assets from the court, which can lead to serious legal repercussions. Instead of trying to shield your assets through transfers, it’s better to disclose everything honestly and work with a bankruptcy lawyer to explore your options.
Choosing The Wrong Bankruptcy Chapter
One of the most significant decisions you’ll make when filing for bankruptcy is choosing between Chapter 7 and Chapter 13. Each type of bankruptcy has different requirements and consequences, and choosing the wrong one could lead to unnecessary complications or missed opportunities.
Chapter 7 involves liquidating your non-exempt assets to pay off as much of your debt as possible, with the remaining debt typically being discharged. This option is usually best for those with limited income and significant unsecured debt. Chapter 13, on the other hand, allows you to keep your assets while reorganizing your debts into a repayment plan that lasts three to five years. This option is often more suitable for those with a regular income who want to catch up on missed mortgage or car payments.
Working with a Bankruptcy lawyer can help you determine which type of bankruptcy is most appropriate for your situation. Attorneys like those at Resolve Law Group can attest to the importance of choosing the right bankruptcy chapter to achieve the best possible outcome.
