Mistakes that people make when filing for bankruptcy
Below are the common mistakes that people make prior to filing for bankruptcy.
Choosing to hire an attorney or not
It’s true that you do not need to hire an attorney. However, there should be no reason for a person to file for bankruptcy without at least consulting with an attorney first. Most bankruptcy consultations are free. An number of attorneys also provide an online evaluation. Moreover, many courts provide free bankruptcy assistance and workshops with actual attorneys to help people interested in filing for bankruptcy. There are reports that state that 99% of Chapter 13 cases do not make it past confirmation without an attorney. Additionally, if you are filing for Chapter 7 and have a home or other assets, hiring an attorney can mean saving your home, cars or other property from liquidation.
Failure to appear or bring your identification to your Court hearing
It sounds strange that people pay the Court fees, file all the necessary documents, take the credit counseling course and decide not to appear to their Court hearing. However, this happens more often than not. If you file your bankruptcy case with an attorney make sure they give you a case number and court date when your petition is filed with the Court. This information is received by your attorney almost the instant they file your case electronically. Also, make sure that you have both your driver’s license and social security card prior to filing your case. Some trustees will give you an opportunity to bring your identification a month later, but other trustees will not be so kind. There is no reason not to have this documentation.
Do not taking new loans to pay debt
If you are borrowing from Peter to pay Paul, it may be time to file for bankruptcy. You should not take out more debt in attempts to consolidate old debt unless you can consolidate all of your debt or reduce your interest rate and monthly payment amount to where it fits your needs. You definitely should not be taking a second or third mortgage on your home to pay your debt if you are thinking about bankruptcy. There are many cases where people do this, and end up filing for bankruptcy anyway. They end up losing their equity and have to continue paying the second or third mortgage.
Do not liquidate your retirement
Retirement account are protected from creditors and from the bankruptcy Court. You should not empty your retirement that you have saved in a desperate attempt to pay off your debt. This is not to say it should never be done, but if your retirement account is not going to pay off all of your debt then there is no reason to do it. If you will still have a large amount of debt after taking out your retirement then you should not do it.
Do not run up more debt prior to filing for bankruptcy
This is presumed to be fraud. Do not open new credit accounts or take out cash advances. These debts are not dischargeable. Do not do it.
Transfer property
Another mistake many individuals do prior to filing for bankruptcy is transferring their property or assets to another person in an attempt to save the property from liquidation. This is also considered fraud or “fraudulent transfer.” In most cases, an attorney can help you save all of your property. By transferring your assets, it is presumed that you are trying to hide your property from the Court. When you fill out the bankruptcy documents, you must list all of your transfers under penalty of perjury. Failure to do so can have serious consequences. The best thing to do is to keep the property in your name and speak with a bankruptcy attorney.