People who are debating filing for bankruptcy frequently think about what they must do to prepare for their case. There are, however, several things that a person should not do when debating proceeding through the bankruptcy process. To provide a better understanding of what actions should not be taken during bankruptcy, this article will review five mistakes that you should avoid when navigating the bankruptcy process.
Things to Avoid: Paying Off Creditors
The purpose of bankruptcy is that it helps all or some of a person’s debts be dismissed. Certain unsecured debts including credit cards and medical bills are capable of being discharged through Chapter 7 bankruptcy, while a person who files for Chapter 13 bankruptcy will create a new payment plan.
Things to Avoid: Maxing Out Credit Cards
It might be tempting to make frivolous purchases prior to filing for bankruptcy, but courts will review all of a person’s financial documents. Many of these last minute bills will not be discharged through bankruptcy, which means that a person will still be required to pay the amount.
Things to Avoid: Cashing Out Retirement Savings
Workers under the age of 59½ are permitted to take a loan against their retirement accounts. If a person takes a loan against his or her 401(k), that person generally pays back the loan with amounts that are taken from his or her paycheck. Using a loan from a retirement account, however, can present some obstacles. If a person leaves his or her employment position prior to paying the loan back, the unpaid balance is treated as a 401K withdrawal and will incur taxes.
Things to Avoid: Transferring Assets
Some people transfer assets in an effort to hide the property from the bankruptcy process. Courts, however, will investigate all of a person’s financial documents for the previous several years and will discover if a person attempted to hide or conceal assets. It is important to remember there are a certain amount of exemptions in bankruptcy cases, which means that a person will not automatically lose everything he or she owns as a result of this process.
Things to Avoid: Filing on Your Own
Many people consider filing for bankruptcy on their own. These people try to avoid the fees charged by attorneys, but often end up being unable to successfully navigate the process and as a result losing more than it would have taken to obtain legal counsel.
Things to Avoid: Do Not Provide Inaccurate Information
On bankruptcy paperwork, a person must provide accurate information about assets, debts, and other aspects of their financial history. Any knowing misrepresentation of a person’s information can result in substantial criminal penalties including fines and years in prison. It is imperative that a person makes sure to provide accurate information when proceeding through bankruptcy.
Obtain the Assistance of an Experienced Bankruptcy Attorney
If you are considering filing for bankruptcy, do not hesitate to contact a bankruptcy attorney. Attorney Jim A Lyon knows the proper steps to take to reduce your financial burden. Contact our law office today.