Common Mistakes When Filing Bankruptcy
What to Avoid When Filing for Bankruptcy?
Bankruptcy is a solution to changing your financial situation and alleviating current debts. To make bankruptcy a positive experience, understand what to avoid when you decide to go through the bankruptcy process.
DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.
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Filing for Bankruptcy
Bankruptcy can be a complicated process that entails careful consideration of your finances and a clear understanding of rules that should be followed. Whether a mistake is made by accident or through innocence, a bankruptcy court may hold you responsible and it could hurt your case. Before filing bankruptcy, contact a local attorney to guide you through your case and help you understand some common mistakes to avoid.
Not Consulting a Local Attorney
A common mistake people make is not considering how long and complicated the bankruptcy process may be and underestimating the benefit of hiring a local attorney to help navigate the process. Bankruptcy laws are consistent among every state, but each state may have exemptions. If filing in Alabama, a resident can avoid errors with filing and understand how to benefit from their state’s exemptions by consulting an attorney who is familiar with local laws rather than filing on their own.
There is no easy way out of debt when filing for bankruptcy. It is best to be completely honest about what assets you may own rather than transferring them to different accounts or family members. Placing a car title in a spouse’s or child’s name will not protect that asset from a bankruptcy court’s decision. Making transfers of assets is a red flag for courts since it can be viewed as dishonest or fraud. Bankruptcy does not mean total loss of assets and your attorney will be able to advise you on managing assets during a bankruptcy case.
Giving Away Assets
There is a misconception that giving rather than transferring an asset to a friend or family member during bankruptcy may be acceptable. This is a warning sign to bankruptcy courts that you are engaging in dishonest activity and will negatively impact your chances of being able to keep that asset.
Use of Credit Cards
When filing for bankruptcy, credit card use should be suspended. As a bankruptcy case proceeds, the court may view the use of credit as acquiring more debt. When this happens, the credit card company has to be listed as a creditor on your paperwork or you may be accused of fraudulent borrowing during your bankruptcy case. Consult with an attorney on how to pay normal living expenses with a debit card and minimizing or eliminating the use of credit cards.
Using Retirement Funds
During the bankruptcy process, retirement funds will be exempt and an attorney will guide you on how to protect those assets. Many assume the best way to use a retirement account is to start draining the money to pay off debts. Paying off certain debts is not permitted when you have filed for bankruptcy. It will cause more legal trouble for you and the loss of money that would have been protected otherwise.
Failing to Understand the Bankruptcy Process
Bankruptcy is a process that should be left to attorneys who specialize in these cases. Not all debts can be solved by filing for bankruptcy and even when they do, it may not be the right time to file for bankruptcy. In the state of Alabama, those planning to file for bankruptcy are responsible for meeting certain requirements, gathering paperwork, and considering your assets. Consulting with an attorney before you begin to file, ensures you understand bankruptcy and what you will need to do to go through the process.
If you are considering filing for bankruptcy, contact a local bankruptcy attorney to understand what errors to avoid before filing and receive the best guidance for your case.
DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.