Don’t Do These 5 Things Before Filing for Bankruptcy

Are you drowning in debt and considering filing for bankruptcy? You’re not alone; in 2023, 452,990 people filed for bankruptcy to get their lives back on track. However, while bankruptcy can relieve financial stress, you must tread carefully. Making the wrong moves before filing could jeopardize your chances of getting a fresh start. In this blog post, we’ll discuss five critical mistakes to avoid before filing for bankruptcy. These tips are essential for anyone facing significant debt and contemplating this major financial step.

• Don’t Incur New Debt

It may seem obvious, but it’s worth reiterating: do not take on any new debt before filing for bankruptcy. This includes credit card charges, loans, or any other type of borrowing. Incurring new debt can be seen as fraud and may result in your bankruptcy case being dismissed. Additionally, if you use a credit card to pay for non-essential items right before filing for bankruptcy, the court could deem those charges nondischargeable. That means they will not be included in your bankruptcy discharge, and you’ll still have to repay them. To avoid potential issues, stop using credit cards and refrain from borrowing money before filing for bankruptcy.

• Don’t Transfer Assets

Are you considering transferring assets to family or friends before filing for bankruptcy? This is a major red flag and should be avoided at all costs. Transferring assets can be seen as an attempt to hide them from creditors, which is considered fraud. The court may even demand that the transferred assets be returned so they can be included in your bankruptcy case. If you have valuable assets, it’s best to discuss their protection with a bankruptcy attorney before taking any action.

• Don’t Make Large Payments

While it may seem like a responsible move to pay off debts before filing for bankruptcy, making large payments to creditors can actually harm your case. If you make a payment of $600 or more to a single creditor within 90 days before filing for bankruptcy, the court may demand that they be returned. This is known as a preference payment and is considered an unfair advantage to one creditor over others. Instead of making large payments, it’s best to stop paying your debts altogether and wait until after your bankruptcy case is filed.

• Don’t Leave Out Any Debts

When completing your bankruptcy forms, you must list your debts accurately. Hiding or forgetting about a debt could result in severe consequences, including having your bankruptcy discharge denied. It’s best to gather all of your financial information and review it carefully before filing for bankruptcy. Consult a bankruptcy attorney for guidance if you’re unsure about a debt.

• Don’t Try to Handle Bankruptcy on Your Own

Filing for bankruptcy is a complex legal process, and attempting to do it without the help of an experienced bankruptcy attorney is not advisable. A mistake or omission in your bankruptcy forms could result in your case being dismissed, delaying any potential relief from your debts. A qualified attorney can guide you through the process, make sure all necessary steps are taken, and give you peace of mind during this challenging time.

Follow Our Guidance – Improve Your Chances

Filing for bankruptcy is a significant decision that requires meticulous planning and adherence to legal guidelines. By avoiding these mistakes, you can have a smoother bankruptcy filing and a fresh financial start.

If you need help with how to proceed, feel free to reach out to Whitten & Whitten for tailored legal advice. Our experienced bankruptcy attorneys can help you make intelligent decisions and achieve the best possible outcome. Contact us today to schedule a consultation and take the first step towards financial freedom.