Filing for bankruptcy is a very big decision. It is very stressful and humbling and the people affected just want to get done with it as soon as possible. But what most filers do not realize is that rushing through the whole process and making mistakes is worse than filing for the bankruptcy itself. Mistakes can be taken as contempt of court or deliberate dishonesty on your part to steer the ruling in your favor. It does not matter if you did it intentionally or not, mistakes will ruin your chances of having a secure financial future. Here are the 7 errors that debtors make when filing for bankruptcy that you should avoid.
1. Going on a purchasing spree with your credit cards
Credit purchases of luxury goods and services in excess of $500 within a time span of 90 days before filing are non-dischargeable. The same goes for cash advances that are over $750 and occur within 70 days of a filing. So, do not go on a credit card purchasing binge, if you have made up your mind to file for bankruptcy. It will be assumed that you are trying to take advantage of the credit card companies.
2. Failure to disclose all information regarding your assets
It is mandated by the law to disclose all your assets, in order to determine whether you are in a position to repay your debts or not. It is therefore against the law to give out half-truths regarding your assets or to deliberately hide an asset that may jeopardize your filing efforts. You may also be tempted to transfer ownership of your assets to a friend or relative, but this may land you in serious problems and you may be charged with bankruptcy fraud.
3. Failure to take a debtor education course
A pre-discharge debtor education course or the personal financial management course is a requirement of chapter 7 and chapter 13 bankruptcy cases. This course is meant to teach you how to manage credit and finances prudently after bankruptcy. If you, therefore, fail to enroll for this course, your bankruptcy case will be closed and you will be denied the discharge that you seek. To reopen the case, you will be forced to pay additional fees to your attorney and the court. To avoid all the unnecessary expenditure, just take up the debtor education course.
4. Failure to list all creditors
You should also ensure that all your creditors are listed. You may be tempted to omit some creditors, especially if they are friends or family members. This obligation to pay them back may stem from the fact that you do not want to sever your relationship with them. However, failure to include them as creditors will not work in your favor, because you will still have creditors to pay once the discharge is awarded to you. Another mistake you should never do is to pay family loans before filing for bankruptcy. This will be viewed as preferential payments to specific creditors and the beneficiaries of the payments will be forced to repay the money back to your trustee.
5. Paying debts with retirement accounts
Never withdraw money from your retirement accounts to pay back creditors. Retirement accounts are exempted from your assets and they can never be seized by creditors or trustees. Furthermore, you may be penalized for choosing to pay some creditors over others, as it will be assumed that you are favoring them. So, do not waste your money paying debts that the bankruptcy will wipe out.
6. Not attending the Meeting of Creditors (341)
Another requirement after filing for bankruptcy is that you have to attend the 341 hearings. The bankruptcy court will issue you the Notice of Commencement of Case, which will include the date, place and time of the meeting. Since you are not given an opportunity to decide which date is appropriate for you, there may be conflict. The good thing is you can attend the meetings via a telephone. However, you have to consult with your attorney to make the necessary arrangements.
7. Not hiring an attorney
Contrary to what most people believe, there is a lot that goes on in a bankruptcy case. There are numerous processes and documents that need to be understood that only qualified attorneys are familiar with. Furthermore, the success rate of people representing themselves in bankruptcy cases is meager. For that reason, you should seek the services of an attorney unless you are a practicing lawyer yourself.
There are many mistakes that debtors make and these are just some of the most common ones. If you have already made errors, do not worry. Consult your attorney, he/she will find a way to help you. For more information about issues related to bankruptcy filing, bankruptcy trustees, or bankruptcy law, check out bankruptcyinbrief.com.