Filing for bankruptcy is never an easy decision. It is a life-changing experience that carries a fair bit of stress in most cases. But, if you tackle it properly, it might not be as damaging as it seems. The main thing is to understand what you are going through and not make any short-sighted mistakes. To help you through the process, we will outline six things you should not do when filing for bankruptcy.
Things you should not do when filing for bankruptcy
You’d be surprised by how many people try to be clever when filing for bankruptcy. After all, it seems that if you hide a couple of assets or keep quiet about some new loans, you might get out of your bankruptcy better off than you were before. But, as you can guess, bankruptcy courts have seen it all. And we don’t mind telling you that they don’t take lightly to any shenanigans that “clever” individuals try to play. The minimal penalty is the outright dismissal of your bankruptcy petition. At the same time, a criminal charge can see you paying $500.000 in fines and serving five years of jail time. With that in mind, here is what NOT to do.
1. Max out your credit card
Maxing out your credit card before filing for bankruptcy is seen as fraudulent borrowing. Namely, it may seem like a good idea to spend as much money as possible before filing for bankruptcy. But the bankruptcy court won’t think so. And neither will the people who issued you the credit card. If the creditor believes that you ran up your debt before filing, they might look to obstruct your bankruptcy petition. You may end up having to pay your credit card debt in full even though you’ve finalized your bankruptcy. A similar idea goes for taking out new loans. Again, if you get caught trying to take advantage of your bankruptcy, you will only end up with more debt.
2. Raid the 401(k)
If bankruptcy is soon to come, it might seem like a good idea to raid your 401(k) to pay off the creditors. But it isn’t. Your retirement accounts are exempt from bankruptcy. Therefore raiding them to mitigate debt doesn’t make much financial sense. This goes for all IRAs, Roth IRS, SEP and Simple IRAs, Keogh plans, 401(k) accounts, and pension plans.
3. Repay only one creditor
If you are considering bankruptcy, you likely have more than one creditor. In this case, you might consider only paying off one of them and having bankruptcy take care of the rest. Doing this can get you and your creditor in trouble. Namely, you cannot put one creditor over the others. Whatever assets you have, every one of your creditors gets a fair share. If you favor one, others can and will find out. Once they do, you will void your bankruptcy petition, and you and your creditor might face charges.
4. Hide debt, income, or assets
One of the most common practices in dealing with a bankruptcy is people trying to hide their financial status. Hiding assets or income to save finances is quite common. And trying to hide debts to qualify for bankruptcy more easily is not far behind. But both of these are essentially doomed to fail. Even if you do something entirely legal, like transferring your asset to a family member, you will still run into considerable problems. Once you file for bankruptcy, you will get a bankruptcy trustee. And you can rest assured that that trustee will do their due diligence in finding out your exact financial status. If you seem to be hiding something, they won’t hesitate in voiding your bankruptcy, and you will get a permanent ban on filing for it. Furthermore, you will likely face fraud charges.
5. Ignore collection calls
Filing for bankruptcy can often be terribly stressful for people. It usually entails changing your entire life and relocating to a cheaper home. Once they file for it, people often become irritable and difficult to work with. While this in itself shouldn’t jeopardize your bankruptcy, it can make it needlessly complex. If your creditors or your bankruptcy trustee have a hard time reaching you, the whole process will be prolonged and inefficient. So, if you are struggling with your small relocation, find professionals to help you deal with it with ease. And try to be as cooperative as possible with the people handling your bankruptcy.
6. Not consult an attorney
Bankruptcy is often a complicated process with a ton of legal jargon and complex implications. So, instead of trying and likely failing to deal with it on your own, you need to seek professionals to aid you. A good attorney is your best bet in filing for bankruptcy in a timely fashion. Even if it seems like a more cost-effective option to handle everything yourself, trust us, it isn’t. At the very least, an attorney will help you decide between Chapter 7 and Chapter 13 bankruptcy and ensure that you keep as many assets as possible. Therefore, they’ll be well worth the money spent.
While there are other things among those we mentioned, they all boil down to a few simple guidelines. First, don’t try to hide anything. You will not only fail at it, but you’ll also put the entire process in jeopardy. Second, let professionals (both attorneys and movers) do their job. Hire an attorney as soon as you decide that you are filing for bankruptcy. The experts from promoversmiami.com advise that you hire movers a month in advance.
During the bankruptcy process, you will likely have to face a ton of issues, especially if you have a family to take care of. Remember, there is life after bankruptcy to consider. So, don’t put yourself through needless stress. Follow those two guidelines, remember the things you should not do when filing for bankruptcy, and embark on your journey!
Freire & Gonzalez is an attorney’s office where the attorneys are involved with their clients from beginning to end. You, as the client, will not be passed off to secretaries or paralegals like at other bankruptcy law firms. The attorneys will meet with you, will return your phone calls, and will answer your questions. We provide services in English and Spanish.
Our lawyers will answer any bankruptcy question you might have during the free consultation. To request a free consultation, please contact us at 305-826-1774. Please browse through our website, read our bankruptcy FAQ and see if our firm can help you resolve your financial issues. Contact Us at our locations: