If you decide to file for bankruptcy to help you regain control of your finances, there are certain mistakes you should avoid making before you file. Making these mistakes could impact your ability to file or cause the court to dismiss your case. Here are some of the top mistakes you should avoid making if you want to file for bankruptcy.
Racking Up New Debt
When a person knows they will file for bankruptcy soon, they might be tempted to go on a spending spree with their credit cards. This is a huge mistake to make prior to filing for bankruptcy because the court may view this as fraud.
When the court suspects fraud in a bankruptcy case, they take it very seriously. In fact, when a person commits fraud in bankruptcy, the court will dismiss the case and the person might suffer legal consequences.
Hiding Your Assets
Another mistake people make when filing for bankruptcy involves hiding their assets. When you use Chapter 7 bankruptcy for debt relief, you risk losing assets. Most people fully understand this and will choose to hide certain assets to prevent this from happening.
If you are tempted to do this, keep in mind that this is also fraud. You cannot hide assets from the bankruptcy court. It is always better to reveal all your assets and take the risk of losing them, rather than hiding them and risking that the court will find out.
Additionally, you cannot give away assets you own prior to filing simply to avoid losing the assets. This is another action the court views as fraud.
Lying About A Windfall Of Cash
When you file for bankruptcy, your lawyer might also ask you questions about cash windfalls you received recently or expect to receive. For example, if you are involved in a class-action lawsuit that you expect to receive money from, you must tell your lawyer and the bankruptcy court.
While you risk losing the money from the lawsuit to your bankruptcy estate, lying about it has serious consequences because the court also views this as fraud.
Filing Under The Wrong Branch
One of the main mistakes people make when filing for bankruptcy is utilizing the wrong chapter. In bankruptcy, the court offers two main types: Chapter 7 and Chapter 13. There are situations where Chapter 7 is better for a person, but there are other situations where Chapter 13 is the better choice.
If you do not fully research your unique situation and both branches of bankruptcy, then you might choose the wrong branch. If this happens, you might not benefit from filing for bankruptcy as much as you could have if you had filed with the other chapter.
Filing At The Wrong Time
The other common mistake people make is filing for bankruptcy at the wrong time. Timing is extremely valuable in bankruptcy cases. Talking to a lawyer is the best way to find out how to time your filing in the best manner possible.
For example, if you file for bankruptcy right after receiving an inheritance, you might lose the money you received from the inheritance. If you wait six months after receiving the inheritance money, you might not have to surrender this money to the court. There are a number of other timing issues your lawyer will talk to you about to help you decide when to file.
Before you decide to file for bankruptcy, you should meet with a bankruptcy lawyer to discuss your personal situation. Contact Charles J. Schneider, P.C. to schedule a consultation. We can help you determine if bankruptcy is right for you.