If you have lost your job, become ill, or are just unable to pay your debt and basic living expenses, bankruptcy may be an option to consider. Unfortunately, many people believe it is an easy way out, which is not true. The process of filing bankruptcy can be a complicated process, so proper understanding is crucial to ensure you will be able to handle this new financial way of life. If you are planning to file bankruptcy, here are a few common mistakes you need to avoid.
Running Up Credit Cards
Once you decide to file bankruptcy, you may feel you have a free pass to go spend as much as you want, charging excessive purchases on your credit cards without any worry of how or when you will pay them off. This is one of the most common mistakes made during the bankruptcy process.
In a chapter 7 bankruptcy, your debts are discharged. However, if the credit card purchases or other bills were made after filing the initial bankruptcy paperwork, they will not be discharged. The same rule applies in a chapter 13 bankruptcy, except the purchases and bills made after filing the original paperwork will not be included in your discharge/repayment plan.
If you make these careless purchases once the petition is filed, the bankruptcy will deem these bills as nondischargeable, making you solely responsible for paying them.
When you begin the process of filing, your bankruptcy attorney will ask for a list of all your debts, basic bills, such as rent/mortgage, utilities, and insurance premiums. In addition, you will need to provide your attorney with a list of all your assets, including real estate, cash and money in bank accounts, vehicles, retirement savings, stocks and bonds, and cryptocurrency.
Failing to list or hide these assets can be problematic. Not only will this mistake prevent your debts from being discharged during the bankruptcy, but hiding assets can also lead to criminal charges that lead to costly fees and even jail time due to fraud in certain bankruptcy cases.
Failing to Attend Counseling
Your attorney will suggest credit counseling to learn tips and tools to help with budgeting and financial management whether you choose to file bankruptcy or not. However, if you do plan to file, credit counseling is required by law.
You must enroll and complete a credit counseling course approved by the government within 180 days before you file for bankruptcy.
The course may be an added expense, but it will be a worthwhile investment in your future finances, helping you budget and pay your bills in a timely manner.
Filing bankruptcy is a great option for many people, but the process should be taken seriously. This guide will help you avoid common mistakes many people make before and during the bankruptcy process. Contact a bankruptcy attorney for more help.Share