3 mistakes to avoid when filing for bankruptcy

On Behalf of | Jun 6, 2024 | Bankruptcy

Filing for bankruptcy is a complex process that can provide much-needed relief from overwhelming debt. However, making mistakes during this process can lead to severe consequences. 

Here are some common mistakes to avoid when filing for bankruptcy.

1. Failing to disclose all assets

One of the biggest mistakes people make is not fully disclosing all their assets. When you file for bankruptcy, you must list all of your assets, which include:

  • Property
  • Investments
  • Bank accounts

Also, include all other valuables you have. If you do not do this, it may result in your case being dismissed. In other situations, it could lead to criminal charges for bankruptcy fraud. When filing for bankruptcy, you must remain honest and transparent about your financial situation. 

2. Accumulating new debt before filing

Another critical mistake is taking on new debt just before filing for bankruptcy. Some think they can max out their credit cards or take out new loans, assuming the debt will be discharged. The court can see this as fraudulent behavior. Recent debts are often scrutinized, and if found to have been incurred under false pretenses, they may not be discharged.

3. Transferring assets to family or friends

Transferring assets to family or friends to keep them from being included in the bankruptcy estate is a serious mistake. This is considered a fraudulent transfer and can lead to significant legal trouble. The bankruptcy trustee can reverse these transfers and include the assets in your estate. Always consult with your attorney before making any asset transfers.

Filing for bankruptcy can be a lifeline for those struggling with insurmountable debt, but avoiding these common mistakes is essential. The information here will help you navigate the bankruptcy process more effectively and achieve a fresh financial start.