According to the Judicial Branch of the U.S. Government, filing for chapter 7 bankruptcy discharges a majority of debts for those who are eligible. It also stops creditors from persistently contacting you an in attempt to recoup money owed once the process is in motion.
Bankruptcy is the right option for many people, but you must take the proper steps to avoid challenges for the most favorable outcome. The following are a few common mistakes people make when going through bankruptcy, as well as what you can do to avoid them.
Being dishonest about your assets
If you have over a certain amount of assets, you may fail the chapter 7 means test which is used to determine eligibility. If you fail to reveal all your assets and are discovered, you may be unable to file at all. Hiding assets rarely works as expected, as the trustee assigned to your case will diligently inspect your financial record to verify the information provided.
Gifting assets to family members
There are no shortcuts to bankruptcy. You are not permitted to hide your assets, and you are also not permitted to give them away to loved ones simply to have them given back at a later date. If a piece of property, such as a vehicle, is still in your name, it will be included in your assets during the accounting process, regardless of whose possession it is in. Being truthful about your assets is the best course of action, and you may be able to retain some of your personal property depending on the circumstances.
Using credit cards irresponsibly
Credit card debt is often eliminated via chapter 7 bankruptcy. Some people believe this gives them free rein when it comes to credit card usage leading up to filing. Be aware that any purchases made 90 days prior to filing may not be included in the debt that is discharged. And if it is believed you intentionally ran up credit card bills, you may be required to pay back the full amount of credit card debt.