Filing for bankruptcy is a significant decision that can provide relief and a fresh start if you face overwhelming financial challenges. However, it’s crucial to approach the process with caution and avoid certain blunders that could prevent you from making the most of the bankruptcy process.
Fortunately, these mistakes are avoidable, and being wary of them can help you start on the right foot on your journey toward financial freedom. Below are some of them.
1. Incurring new debt
Accumulating new debts shortly before filing for bankruptcy can complicate your case and even raise suspicions of fraudulent behavior. Refrain from making large purchases, cash advances or running up your credit card debt in the lead-up to filing for bankruptcy. These transactions may come under scrutiny, and you could be forced to repay debts incurred in bad faith.
2. Transferring assets
Transferring assets to family members or friends with the intention of protecting them from bankruptcy proceedings is a grave mistake. Such transfers may be considered fraudulent and can jeopardize your bankruptcy case. The court-appointed trustee has the authority to investigate and reverse any fraudulent transfers, potentially leading to the loss of the transferred assets. You could also face criminal charges.
3. Not disclosing all assets and debts
Failing to provide accurate and complete information about your assets and debts can have severe consequences. Be thorough and transparent when listing all your creditors, income sources, properties and personal belongings. Honesty is key to ensuring a successful bankruptcy case.
4. Not seeking legal guidance
Filing for bankruptcy without the necessary information or understanding of how things work and not to expect is not advisable. For instance, some debts cannot be discharged by bankruptcy, while some assets are exempt.
Seeking the necessary assistance can help you make sense of everything and avoid these and other pitfalls while protecting your interests through the entire bankruptcy process.