Filing for bankruptcy is a good option for people faced with exorbitant debt. Whether filing for chapter 7 or chapter 13, you must adhere to the specific laws regarding eligibility and your financial actions. Debt.org explains some of the common mistakes people make when filing, and what you can do to avoid them.
Relying heavily on your credit card
In the lead-up to bankruptcy, some people incur huge credit card bills in the belief that all debt will be discharged at the end of the proceeding. If a creditor believes this occurred, you may still be on the hook for that debt even after the bankruptcy period has ceased. For instance, credit card purchases made with the 90-day period after filing may not be included in the bankruptcy. You could also be charged with fraud if it’s believed that you ran up charges deliberately.
Paying off specific creditors
You’re not allowed to show one creditor preferential treatment over another. If so, the money paid may be seized from the recipient so it can be distributed equally among all creditors. Gifting property or assets to your loved ones is also not permitted. With property, the debt attached to the item will still be your responsibility. The item may also be seized and sold to recover some portion of the debt, regardless of its current ownership status.
Not retaining legal counsel
While you are allowed to file on your own, professional legal assistance greatly improves the chance of a successful case. Bankruptcy is a complex process, and even determining eligibility status can be difficult for many people. An attorney can help you decide between chapter 7 and chapter 13, while also providing legal solutions to protect property and assets.