No one is perfect, but when it comes to filing bankruptcy you want to aim to be as close to perfect as possible. Below are five of the most common and damaging mistakes many filers make when filing bankruptcy.
- Not listing all creditors. When you’re drowning in debt it can feel chaotic and overwhelming. Unfortunately, information about creditors may get lost in the chaos or you may desire to keep certain “special” creditors out of your bankruptcy case. However, you are required by law to include all of your creditors in your bankruptcy filing, even if you intend to repay them later. If you mistakenly omit a creditor that debt may not be discharged in bankruptcy.
- Hiding assets. It’s tempting to not mention an extra bank account or attempt to transfer large chucks of cash to a relative right before filing bankruptcy but it’s also against the law. Attempting to hide your assets when filing bankruptcy will put your discharge in jeopardy and you could face fines and a prison term for bankruptcy fraud.
- Repaying family before a bankruptcy filing. This is a sore spot with a lot of debtors who owe family members money and don’t want to discharge those family loans in bankruptcy. The problem is that if you attempt to repay your family members (or any creditor) before you file bankruptcy, the trustee may view the payments as “preferential” and disallow them. This means that your family member may be required to pay the money back to the trustee.
- Going on a spending spree. Some debtors take on an “it doesn’t matter” attitude about charging purchases to their credit cards before filing bankruptcy. This is a mistake. Large purchases charged to your credit card right before filing bankruptcy may not be dischargeable. You should discontinue using your credit cards as soon as you realize you can’t pay them.
- Waiting too long. Debt can take on a snowball effect in your life. Delinquent bills become collection accounts and collection accounts become wage garnishments. Don’t let the corrosive power of time and debt hurt your finances, explore your bankruptcy options as soon as you realize you can no longer pay your debts.
Avoid the most common bankruptcy mistakes and improve your bankruptcy experience.