A lot of bankruptcy filers make mistakes which can complicate the bankruptcy process for them. These mistakes are usually made even before they file their petition for bankruptcy at the courthouse. By committing these mistakes, the individual may not qualify to file for bankruptcy at all. In other cases, the mistakes can have an adverse effect on their bankruptcies. Some of the common mistakes which should be avoided before filing for bankruptcy are listed below:
Continuing to use credit – If the filer has been purchasing on credit weeks or months before the bankruptcy, knowing that they won’t be able to pay back, it raises the question whether or not the filer is filing for bankruptcy in good faith or not. If the purchases were made intentionally, the bankruptcy may be considered fraudulent. If the court finds out, it may deny the bankruptcy petition altogether. In other cases, if the bankruptcy petition is approved, the creditors will still have grounds to object.
Transferring property – Some bankruptcy filers may transfer money or property into the name of someone else in order to “protect” those assets, especially when they know they will be filing for bankruptcy soon. These assets or property could be transferred in the name of a child or spouse. Using tactics like these often results in a bankruptcy fraud investigation and may also cause the filer to lose the bankruptcy protection. Those filing for bankruptcy may still be able to keep those assets even if they file for bankruptcy, but they won’t be able to do that if they no longer own those assets legally.
Paying back creditors selectively – When a person owes money to a friend or relative, they may consider it a moral obligation to pay back that loan before filing bankruptcy. They may have other loans and creditors to pay, but they just choose to selectively pay some of them and then file for bankruptcy. Selectively paying creditors can be a disaster for bankruptcy filers. The individual who was paid back by the filer may be sued by the bankruptcy trustee in order to recover those funds for the bankruptcy estate.
Not filing your income tax return – Filing your tax returns is important as it is a source of information which is needed by the court. Income tax returns show what assets are owned by the filer, along with their current earnings. This way, the bankruptcy lawyer may be able to protect those assets. Failing to file a tax return may result in the dismissal of their bankruptcy case.
Providing incorrect information – When a person files for bankruptcy, he is required to submit important financial information with the court. If the filer knowingly presents inaccurate information, he may face criminal prosecution.
Not hiring a bankruptcy attorney – Bankruptcy law is a complex area which requires the services of an experienced and qualified attorney. By hiring a bankruptcy lawyer at the right time, you can avoid making these costly mistakes and go through the bankruptcy process smoothly.
Apart from these obvious mistakes, the bankruptcy filer may commit other mistakes that can harm his case, such as altering their financial transactions, making a legitimate legal claim against another person or entity, receiving future payments, and ignoring collection actions.
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