When done right, filing for bankruptcy can give you a much-needed financial reset and an opportunity to get back on your feet. However, not everyone gets to enjoy the benefits of bankruptcy.
Some actions or mistakes before, during or after filing for bankruptcy can come back to haunt you even after the process is complete, and you need to be wary. Fortunately, most of these mistakes are avoidable if you understand what to do when filing for bankruptcy. Some of the common mistakes people make are explained below.
1. Do not max out your credit cards
You may think of running up your credit card with the view that such debts will be discharged. However, you may have to repay debts incurred in bad faith before filing for bankruptcy. If anything, avoid getting into debt once you decide to declare bankruptcy.
2. Don’t hide or transfer any assets
It is never a good idea to hide assets when filing for bankruptcy. You risk facing criminal charges (for fraud or perjury), and the trustee court can also revoke your bankruptcy discharge. There is a look-back period that applies when filing for bankruptcy. Your finances will come under scrutiny during this time, and all suspicious transactions will be flagged.
3. Don’t omit any debts when you file
It is equally important to disclose all your debts when filing for discharge. If you do not list a debt, you may still be legally obligated to repay it even after filing for bankruptcy.
4. Don’t wait longer than you should
You may not realize the benefits of bankruptcy if you wait too long. For instance, creditors can repossess your possessions if you delay filing for bankruptcy. By the time the court grants an automatic stay that prevents creditors from taking any adverse actions, it may be too late to save the day.
It is advisable to learn more about how bankruptcy works and what to expect during the entire process. You will find it easier to get through everything and protect your financial interests with the proper understanding of everything.