Once you make the decision to file for bankruptcy protection, you want the entire process to go well and be over with as soon as possible.
Transparency will be important, and with that thought in mind, here are five mistakes you should avoid as you approach your bankruptcy filing:
1. Repaying relatives
As your debts mounted, you may have received a family loan. Your first thought may be to pay Aunt Mary back before you file for bankruptcy. However, the bankruptcy trustee would likely term the payment ‘preferential’ and disallow it. Aunt Mary would then be required to redirect that money to the trustee.
2. Running up debt
It might be tempting to enjoy one last spending spree, but keep a tight rein on your credit cards. The items you purchase right before filing for bankruptcy might not be dischargeable. Do not use your credit cards anymore’; instead, cut them up.
3. Squirreling away assets
Some people try shuttling money off to friends or relatives for safekeeping during the bankruptcy process, and others do not report having an extra bank account somewhere. Hiding assets when you are filing for bankruptcy is against the law. You could face heavy fines, even some prison time.
4. Failing to account for all creditors
You may have a couple of favorite creditors that you would like to keep away from the bankruptcy case. However, the law requires you to list all creditors. If you omit one or two, their debts may not be dischargeable.
5. Waiting to file
In making the decision to file for bankruptcy, you may procrastinate—after all, it is a big step to take. Keep moving forward, and make an appointment with your attorney. To delay filing will only exacerbate your debt situation.
Looking forward
Sometimes people feel they are admitting to failure by declaring bankruptcy. On the contrary, there are many reasons for going into debt, but bankruptcy is a legal way to put all that behind you and turn your financial life around. Rely on sound advice, avoid mistakes and look confidently toward a brighter future.