Bankruptcy can be a stressful process, and making mistakes can only add to that stress. It's important to be aware of all the costs associated with filing for bankruptcy and understand how to navigate the process. For instance, did you know that there are different types of bankruptcy, such as Chapter 7 and Chapter 13, that can help eliminate your unsecured debts and give you a fresh start?
However, it's crucial to avoid common mistakes when filing for bankruptcy. These errors can make your case more complicated and potentially harm your chances of success. For instance, using your credit cards or failing to disclose all your assets and debts can cause significant problems down the line. By being informed and avoiding these mistakes, you can make the bankruptcy process smoother and less stressful.
How to Avoid a Bankruptcy Mistake That Could Hurt Your Case
Hey there! Are you considering filing for bankruptcy? It's important to know that even before you start the process, there are some common mistakes that could negatively impact your chance of a successful fresh start. Here are a few things you should keep in mind:
1. Know The Costs of Bankruptcy
When you're facing financial hardship and need to file for bankruptcy with an attorney, one of the most significant fees you'll encounter is the bankruptcy attorney fees. However, the costs can vary greatly based on factors such as the chapter of bankruptcy, the attorney's expertise, and the level of interaction with the attorney.
To help you estimate your all-in costs and avoid going into your free consultation blind, we created a free all-in bankruptcy cost calculator. Simply enter your state and zip code, and the calculator will provide an estimate in just 2-5 minutes. You can access the calculator through the All-In Bankruptcy Cost Estimator or the link below.
2. Stop Using Your Credit Cards
If you're considering filing for bankruptcy, it's important to know that any debts you incur right before filing cannot be eliminated. To avoid making a costly mistake, it's best to stop using your credit cards altogether.
It's also crucial to note that using your credit cards for luxury purchases or services over $800 within 90 days of filing for bankruptcy is considered fraud. The same goes for cash advances over $1,100 within 70 days before filing. If you do incur these debts, the credit card company can object to discharging them.
So, to ensure a smooth bankruptcy process, it's best to avoid using credit cards altogether and prioritize paying off any outstanding debts before filing.
3. Do Not Sell or Transfer Property or Money
Before filing for bankruptcy, it's important to be aware of the consequences of transferring or selling your assets. If you give away or sell your assets, the Chapter 7 trustee may sue you to recover the asset. This is because trying to conceal assets by transferring them is considered bankruptcy fraud.
That being said, you may be able to sell an asset for fair market value and use the funds for living expenses without any issues. However, it's always best to consult with a bankruptcy lawyer before transferring any property before filing for bankruptcy. The property might be protected by bankruptcy exemptions, which would allow you to keep the property.
It's important to note that most people who file for bankruptcy are able to keep their property. However, attempting to hide your property could result in losing it due to committing bankruptcy fraud.
4. Do Not Withdraw Money From Your Retirement Accounts
Good news for those planning for retirement! When you file for bankruptcy relief, most retirement accounts are exempt. This means that they are protected from being taken away by the bankruptcy court. However, it's important to note that withdrawing money from these accounts can cause you to lose this exemption. In such cases, the Chapter 7 trustee may take the money or count it as an asset when calculating your Chapter 13 plan. Hence, it's advisable to leave your retirement savings untouched and use bankruptcy exemptions to safeguard your hard-earned money.
5. Do Not Pay Family Members or Friends Before Filing Bankruptcy
If you've paid back a family member or friend within a year before filing for bankruptcy, it's considered a preferential transfer. This means that the bankruptcy trustee can sue them to recover the money for the bankruptcy estate. It's important to list any debts you owe to family or friends in your bankruptcy filing. However, if the money they gave you was a gift, you don't need to list them as a creditor.
Once your bankruptcy case is closed, you can choose to pay back any money you owe to family and friends. Keep in mind that if they are listed as unsecured creditors in your bankruptcy case, you're not legally obligated to repay the debt.
6. Do Not Use Money From Your Home Equity Line to Repay Debts
If you're considering using the equity line on your home to pay off debts, it's important to first speak with a bankruptcy lawyer. This is because bankruptcy exemptions may actually protect the equity in your home. What does this mean? Well, if your home is covered by bankruptcy exemptions, neither your creditors nor the bankruptcy trustee can use the equity in your home to repay any unsecured debts you may have.
This is great news because it means that you may be able to file for Chapter 7 bankruptcy, eliminate your unsecured debts, and still keep the equity in your home. However, it's important to speak with a bankruptcy lawyer first to ensure that your home is indeed covered by these exemptions. This way, you can make an informed decision about using your home equity to repay debts.
7. Do Not Lie About Your Income or Expenses
When filing for bankruptcy, you might be tempted to manipulate your income or expenses to qualify for Chapter 7 bankruptcy or lower your bankruptcy plan payments for Chapter 13 bankruptcy. However, it's important to note that the bankruptcy trustee will review your pay stubs and other income evidence for the six months leading up to your filing. Additionally, they may scrutinize your current pay stubs and tax returns.
If you claim expenses that seem higher than average for a family of your size, the trustee may request proof of those expenses. In cases where you claim extraordinary expenses, such as special dietary needs due to a health condition, you'll need to provide proof of payment and why the expense is necessary.
8. Do Not File a Bankruptcy Case Before Receiving a Valuable Asset
Did you know that receiving an asset during your bankruptcy case could result in losing it? This is especially true if you did not disclose the asset on your bankruptcy forms and claim a bankruptcy exemption for it. For instance, let's say you're expecting a $6,000 tax refund but fail to disclose it as an asset and claim an exemption for it. In that case, the Chapter 7 bankruptcy trustee might seize the refund.
If you anticipate receiving a bonus from work, inheritance, tax refund, gift, or any other assets during your bankruptcy case, it's essential to consult a bankruptcy lawyer. An experienced attorney can review your case to determine whether the asset could be in jeopardy if you file for bankruptcy. If that's the case, the attorney can discuss other debt-relief options or time the filing of your bankruptcy case to protect the asset. Don't risk losing your assets; consult a bankruptcy lawyer today.
Do You Need Help with Debts You Cannot Pay? We Can Help You Avoid a Bankruptcy Mistake
We understand that dealing with debt can be overwhelming and stressful. That's why we offer affordable solutions to help you get back on track. The best part? Most of our services are free of charge.
Our team is here to support you every step of the way. You can talk to us about your debt-relief options and explore bankruptcy options without worrying about fees. We also offer helpful tools like our free all-in bankruptcy cost estimator and debt-relief comparison calculator to help you make informed decisions.
If you're considering bankruptcy, we can connect you with a bankruptcy lawyer near you who offers free consultations. With our help, you can take control of your debt and start building a brighter financial future.
Avoid a Bankruptcy Mistake
Do you feel like you're drowning in debt? Don't worry, you're not alone. Many people struggle with debt and financial stress. But there is a way out. We offer a free debt evaluation to help you understand your options and take control of your finances.
Our services are designed to help you build a solid financial foundation for yourself and your family. We offer personalized debt management plans, financial coaching, and credit counseling. Our team of experts will work with you to create a plan that fits your unique situation and goals.
Don't let debt hold you back any longer. Give us a call today to schedule your free debt evaluation. Let us help you take the first step towards a brighter financial future.