Filing for bankruptcy can alleviate a great deal of the financial stress you feel. However, if you want to fully reap the benefits, you may want to watch out for some common mistakes many people make in this process.
Both Chapter 7 and Chapter 13 petitions have advantages as well as potential pitfalls. While this overview can help you understand some issues that often come up, speaking with an experienced attorney is the best way to get a full picture of your own situation.
Filing too late
Timing can affect the extent to which your bankruptcy filing can help you. Many people delay filing and do not see a lawyer until they completely run out of other options. However, if you put off filing for too long, you may give creditors the time they need to sue you, get a judgment and put a lien on your property. Once this happens, it can be hard to get rid of the lien.
Trying to game the system
Once you file your petition, you can expect your creditors and the court to examine your transactions in the months leading up to the bankruptcy. A typical Chapter 7 works by creating a pool of nonexempt assets and apportioning the proceeds among the creditors. If you recently paid off certain creditors before filing, you have exempted them from this process, which can be unfair to the rest of the creditors. The court can require them to put the money back into the bankruptcy estate for proper division. Conversely, making expensive purchases or large cash withdrawals prior to filing can lead to accusations of fraud.
Doing it yourself
It can be tempting to just download the bankruptcy forms and file a petition on your own. Unfortunately, this type of shortcut can leave you worse off than when you started. Even seemingly straightforward cases can contain complicated issues you would need legal knowledge to identify and handle. A qualified attorney can advise you as to the best way to move forward and take the right steps for an effective petition.