9 Mistakes To Avoid When Filing for Bankruptcy
Are you contemplating filing for bankruptcy? If you are, it is vital that you do your best to avoid making mistakes many people have made in the past. A qualified bankruptcy attorney can help you avoid making mistakes so you can achieve what you intend to achieve from the bankruptcy process. In this article, we discuss seven common bankruptcy mistakes you should avoid.
- Not Choosing to File the Right Chapter of Bankruptcy
One of the biggest mistakes you can make when filing for bankruptcy is failing to choose to file the right chapter of bankruptcy. For example, do not choose to file Chapter 7 bankruptcy when the right chapter for you is Chapter 13. Filing the wrong chapter of bankruptcy can cause a major setback in your debt relief. A qualified bankruptcy attorney can help determine which bankruptcy chapter is right for your circumstances.
2. Waiting Too Long to File
If you owe creditors money and cannot repay, the worst thing you can do is wait too long to file for bankruptcy. Often, debtors can save substantial money if they avoid delaying filing for bankruptcy. Regardless of how you incurred debt and why you are considering bankruptcy, it is best that you take the necessary steps immediately.
3. Failing To Attend the Necessary Credit Counseling and Debt Management Programs
You will be required to get credit counseling before filing for bankruptcy. You willalso be required to complete a debt management educational course after you file your bankruptcy case. It is crucial that you attend the necessary credit counseling and debt management programs. Failure to do so can result in the bankruptcy trustee dismissing your case without a Discharge Order being entered.
4. Failing To Understand the Role of the Bankruptcy Trustee
It is crucial that you understand the role of the bankruptcy trustee. Generally, the bankruptcy trustee is responsible for managing your case. They oversee your estate in the bankruptcy proceeding. A qualified bankruptcy attorney can help you understand everything you need to know about the bankruptcy trustee’s role.
5. Using Retirement Funds To Repay Debt
If you are considering bankruptcy, you should hold off on paying debts with retirement funds. Generally, retirement accounts are protected from creditor claims. When you file for bankruptcy, the money in your retirement accounts may be fully exempt. You may be able to keep all the money in your retirement accounts. It is best that you avoid withdrawing money from your retirement accounts before you consult with a bankruptcy attorney. Because once you do that, the money may be no longer protected from creditor claims. Exemption Planning is a critical part of preparing your bankruptcy filing.
6. Mortgaging Your Home To Pay Off Debt
Something else you should not do when filing for bankruptcy is to mortgage your home to pay off unsecured dischargeable debt without first speaking to an attorney. A lawyer can advise you on whether you can keep your home after bankruptcy. Often, debtors can keep their homes after filing for bankruptcy. If your home is exempt, it may be better for you to get rid of your debt in bankruptcy than by taking a secured home equity loan against your home that you may be unable to repay.
7. Hiding Information From Your Attorney
Finally, do not hide information from your bankruptcy attorney. Answer your lawyer’s questions truthfully to avoid a dismissal of your case, losing assets, or facing criminal penalties as you sign your bankruptcy petition and schedules under penalty of perjury. Moreover, truthfully disclosing all of your assets is an essential part of preparing your bankruptcy case filing in order to make the best legal decision possible for your particular circumstances.
- The Repay a Family Member Mistake Before You File Mistake:
You cannot treat your family member any better than you would an ordinary creditor with regard to repaying debts. A bankruptcy trustee may be able to recoup money you pay a family member which was repaid within one year before you file your bankruptcy case. This is what is called an avoidable preferential transfer, which the trustee uses to recapture payments made to preferential payments made to unsecured creditors over others. Avoidable preferential transfers to unsecured creditors are normally limited to payments made within 90 days before your bankruptcy filing; however, family members are considered insiders under the Bankruptcy Code which extends the avoidance period to one year.
- The Transfer Property Out of Your Name Mistake:
A bankruptcy trustee can undo a transfer of real or personal property that previously belonged to you, if the transfer lacked adequate consideration or no consideration was given. A trustee has the statutory ability to avoid a fraudulent transfer that was made within two years under the U.S. Bankruptcy Code of the filing of your bankruptcy case if the transfer was made with the intent to hinder, delay, or defraud a creditor, or if simply a fair price was not received. It is imperative that you consult with a bankruptcy attorney before you make any transfers of property if you are considering bankruptcy.
Contact a Qualified Lehighton & Carbon County Bankruptcy Attorney
Our Lehighton & Carbon County bankruptcy attorneys at The Law Offices of Adam R. Weaver, Esq., can help you protect yourself as you navigate the bankruptcy filing process.