Common Bankruptcy Mistakes

Let’s delve deeper into some critical aspects to provide you with a comprehensive understanding of avoiding the most common bankruptcy mistakes.

Mistakes To Avoid With Personal Debts

Repaying Family Members

The law treats family members like any other creditor regarding repaying friends or a family member’s debts. The bankruptcy trustee can make a claim for repayments made to family members within one year of filing for bankruptcy. Maintaining a fair and equitable approach to repaying debts is essential, even when dealing with relatives.

Protecting Retirement Accounts

Your retirement accounts are generally safeguarded in bankruptcy proceedings. You can eliminate your debts by declaring bankruptcy, while protecting your retirement accounts.

A lawyer who knows the bankruptcy code can help you keep any valuable asset in an ERISA-qualified retirement account intact. It’s essential to resist the temptation to liquidate these accounts to pay off credit card debt, as doing so could jeopardize your long-term financial security.

Taking on New Debts

When you recognize that your existing debts are overwhelming and unmanageable, it’s a significant mistake to continue taking on new debt. There is a better time to use your credit cards or incur additional obligations. Doing so only exacerbates your financial situation and may complicate your bankruptcy case. Also, keep a close watch on your taxes.

Be Careful With Credits When You File Bankruptcy

Property Transfers

Be cautious about transferring property out of your name within two years of filing for bankruptcy, especially if the intent behind such transfers is to hinder, delay, or defraud creditors. Bankruptcy trustees can undo such transfers and recover assets and can even go back 6 years in states like Michigan, potentially causing more complications in your bankruptcy case. You can protect your assets if you avoid these common bankruptcy errors by seeking sound legal counsel.

Credit Card Usage

Once you decide to file for bankruptcy, exercising caution with your credit cards is crucial. Debts incurred for luxury goods or services exceeding $600 within 90 days of filing a bankruptcy petition and cash advances over $750 within 70 days may not be dischargeable in bankruptcy. This means that even though you’re seeking financial relief, irresponsible credit card usage during this period could lead to a less-than-ideal fresh start and a possible lawsuit also known as an adversary proceeding in the bankruptcy case.

Second Mortgages

If you own real estate, think twice about bankruptcy law before taking out a second mortgage or a line of credit to pay off credit card debt.

Bankruptcy often allows you to keep valuable assets, including your home. Taking such actions puts your home at risk when there are alternative ways to manage your debt through bankruptcy.

Common Mistakes Before Bankruptcy Court

Honesty with Your Bankruptcy Attorney

Be completely transparent and honest with your bankruptcy attorney throughout the bankruptcy process. Your attorney can only provide you with the best advice and strategies based on the information you provide. Failure to disclose assets or relevant information could lead to severe consequences, including asset loss, case denial, fines, or even imprisonment.

Court Proceedings

It’s a common misconception that an experienced bankruptcy attorney deciding to file for bankruptcy will automatically halt any ongoing collection cases against you. Until your bankruptcy case is officially filed, these collection proceedings continue.

It’s essential to stay engaged in any pending legal matters and communicate with your attorney about your intentions.

Hiding Assets

Concealing assets is a severe mistake that can take away your financial freedom forever. You must demonstrate to the court that you cannot cover your outstanding debts.

If your assets could be sold to repay an ordinary creditor, as in Chapter 7 bankruptcy, you must be prepared to do so if you wish to proceed with bankruptcy. Attempting to hide assets through bankruptcy fraud is no minor mistake. It can severely affect your eligibility for financial relief and cause you to be federally indicted for bankruptcy fraud.

Remember, I’m here as your friend and lawyer to support you every step of the way. Don’t hesitate to reach out if you have any questions or need assistance navigating your financial situation.

Your fresh financial start is attainable, and together, we can work towards achieving it while avoiding these common bankruptcy pitfalls.

An Experienced Bankruptcy Attorney Can Help Filing Bankruptcy

An experienced bankruptcy attorney plays a pivotal role in guiding individuals through the complex process of filing for bankruptcy. When facing overwhelming debt, many individuals might resort to what seems like a futile attempt to alleviate their financial burden.

However, they need professional guidance to avoid making critical mistakes, such as running up credit card bills or attempting to hide assets. In the eyes of the bankruptcy court, creditors are not treated as ordinary creditors, and these actions can raise red flags.

One of the critical areas where a bankruptcy attorney’s expertise shines is in addressing collection cases pending against their clients. These ongoing legal actions can be daunting, but an experienced attorney knows how to navigate them while preparing for the bankruptcy filing.

They ensure that their clients understand that filing for bankruptcy doesn’t automatically halt collection cases and guide them on approaching these situations strategically.

A skilled bankruptcy attorney can also help clients avoid pitfalls like fraudulent transfers. They understand the nuances of bankruptcy law and can provide valuable advice on asset protection and property transfers that comply with legal requirements.

By working closely with an attorney, individuals can make informed decisions that protect their assets and increase their chances of successfully discharging their debts through bankruptcy.

Ultimately, having the guidance of an experienced bankruptcy attorney can make a profound difference in the outcome of a bankruptcy case, helping individuals achieve the fresh financial start they seek.