Featured News 2019 7 Mistakes to Avoid When Filing for Bankruptcy

7 Mistakes to Avoid When Filing for Bankruptcy

Every type of bankruptcy requires a significant amount of preparation. Your future depends on an accurate bankruptcy filing, so educating yourself on mistakes frequently made during the process can help you avoid any trouble. Here are seven common mistakes and their solutions.

Submitting Forms with Incorrect or Missing Information

You must fill out paperwork accurately and provide correct information during your 341 hearing. If you fail to do this, you might be charged with perjury if you withheld information or knowingly lied. Even worse, if you forget to disclose assets, they can be seized and auctioned to pay creditors. Importantly, making an honest mistake could eliminate some much-needed debt relief. Being thorough with your paperwork will ensure that you are receiving as much benefit from the process as possible and will shield you from being accused of perjury.

Not Filing Tax Returns

If you have not filed any tax returns for the last two years, you will need to do so. Having unfiled tax returns will prevent you from being able to file for bankruptcy. Tax returns provide important income tax information and its absence could cause your case to be dismissed.

Incurring More Debt

Be careful to avoid incurring more debt within 70 to 90 days of your bankruptcy filing. If you do develop more debt, a creditor will be able to object to having that debt dismissed. To make the situation worse, a person who accrues more debt after a bankruptcy filing might face accusations of fraud.

Selling, Moving, or Hiding Assets

Filing for bankruptcy means that you must report all your current and future assets. Selling assets with the intention of regaining them or hiding them from your bankruptcy filing is illegal. If you are caught selling, moving, or hiding assets your bankruptcy case could be dismissed and you may receive criminal charges. If you sold assets to pay off debts, this is legal and should be disclosed on your financial affairs statement and mentioned at your 341 hearing.

If the sale and repayment to a creditor was recent, a trustee wants to know in case that money should be redirected to another creditor (keep reading to understand more about this possibility).

Only Repaying Certain Loans

If you’ve repaid loans from family and friends within the last year but failed to repay other creditors, this could be viewed as a preferential transfer. If a bankruptcy desires, they can sue creditors who were preferentially paid and then redistribute the money among all your creditors. Avoid paying back loans without the advice of an attorney. Even if your intent is honest, paying back the wrong loans may be detrimental to your bankruptcy filing.

Taking Too Long to File

If a creditor is already preparing to collect wage garnishments, take your vehicle, or foreclose on you, then a delay could prevent you from being protected from these loses. Immediately inform your creditors that you will file for bankruptcy, and then have your bankruptcy lawyer help you stop any processes that could cause the loss of your assets. Acting quickly can save your property and money from being seized.

Filing While Expecting a Payment

If you are expecting an inheritance, payment from a lawsuit, a large tax return, or any other type of significant gain in assets then you should consider delaying your bankruptcy filing. These assets could be used to pay off creditors, and you can save yourself from going to the process of filing for bankruptcy. Speaking with a lawyer will help you decide your best options.

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