3 Bankruptcy Mistakes You Should Avoid
It may be upsetting to file for bankruptcy, but it could be the ideal solution that will get your personal finances back on the right track. Unfortunately, there are some mistakes that you can make during the process that could cause big problems with your bankruptcy case. You must avoid doing these 3 things when you want everything to go smoothly.
Transferring Assets To Someone Else's Name
A common mistake that people will make is transferring assets to friends or family members before they start the bankruptcy process. The thought is that they do not want to lose those possessions and that they would rather give them to somebody they know instead.
The problem is that the courts will discover the transfer of high value assets, such as a car or property, when you file for bankruptcy. Even if you did it before you started the process, you could still end up losing those assets if they were transferred within 2 years of filing for bankruptcy. You are better off disclosing all asset transfers to avoid any road bumps in the filing process.
Paying Off Creditors
Another mistake is when someone decides to pay off a lot of their debts before filing for bankruptcy. You may feel like you are doing the right thing by doing this, but there are mistakes that can be made when paying off debts. For example, the bankruptcy court may view it as if you are treating some creditors differently than others. This could cause your bankruptcy case to be denied.
Review any debts that you want to pay off with a lawyer to ensure that it is being done properly. Debts paid within 90 days of filing are considered preferential transfers, and that time period extends to a year for family members or friends that you owe money to. If caught, a clawback lawsuit can be filed to get that money back from your creditor.
Handling Your Own Bankruptcy Case
Those that need to file for bankruptcy are obviously going through a rough time financially. It's one reason why many people do not hire professional help to get them through it, because they feel like it will be too expensive and just add on to their debt. This may be the biggest mistake that you could make during the process.
In addition to guiding you through the process, those unfamiliar with what needs to be done could unknowingly commit bankruptcy fraud. Hiring a lawyer can help you avoid any missteps that could end up setting you back even more.