Rushing into Bankruptcy Without Exploring Other Options
The major error that individuals commit prior to bankruptcy is leaping into it without weighing all the options presented to them in terms of debt relief. Other options such as debt negotiation, loan modification or debt consolidation programs might not be as harmful to your credit and financial future. The cases of bankruptcy filed at the wrong time may have an undue long term effect on the individual which can be escaped with due planning and counsel.
Failing to Fully Disclose Assets and Debts
The first mistake that is very critical with the bankruptcy filings is the failure to be fully truthful about all your finances. This involves the inability to enumerate all the debts, assets, sources of income, recent transactions as well as liabilities. Failure to disclose or conceal assets and debts may be considered as fraud and your case will be dismissed, debt discharge will be denied and a criminal prosecution may be filed. The key to a successful bankruptcy process and evading expensive legal hassles is full disclosure.
Accumulating New Debt or Large Purchases Before Filing
Most people make the error of thinking that they can run up, or take out huge debts or purchases right before declaring bankruptcy and have their debts discharged. Courts however tend to regard such as presumptive fraud particularly when they occur within a 90 days preceding filing. Such debts may not be wiped off and that is you would still owe them even after becoming bankrupt. It is advisable to avoid new debts or cash advances prior to filing so as to protect your case.
Ignoring or Missing Court Requirements and Deadlines
Bankruptcy involves following several steps of the process, including attending the creditors meeting, undergoing the mandatory credit counseling during the filing process, and post-filing debtor education classes. Late completion of deadlines, not taking the necessary courses, or not handing in your paperwork properly may result in a delay, having your case thrown out, or a loss of debt relief. It is essential to remain organized and address every requirement to have a smooth process.
Improper Handling of Assets and Transfers
Before going to bankruptcy, transferring, selling, or giving away property at a lower price than its market value can result in serious punishments. These kinds of attempts are fraudulent transfers and can be undone by the bankruptcy trustee. This may lead to discharge of debt denial, fines or even criminal charges. Before filing, it is essential to maintain a good record and prevent any dubious transaction of assets.
Other Common Pitfalls
Other errors made are neglecting pending lawsuits or judgments, making selective payments to some creditors prior to filing (preferential payments) and not hiring an experienced bankruptcy lawyer at an early stage. Such mistakes may make the process more complex, more expensive, and threaten the opportunity to get out of debt.
These are some of the most frequent errors that should be avoided when filing a bankruptcy by completely disclosing finances, avoiding any new debt, adhering to the requirements of the court, and consulting a qualified lawyer so that the process of bankruptcy becomes more successful and less stressful.