The decision to file bankruptcy is not one to be taken lightly. Individuals often face enormous financial pressure and struggle with mounting debt for years before realizing that bankruptcy is the right option. From job loss and home repair to divorce and medical debt, it is not uncommon for hardworking individuals to become overwhelmed with debt from numerous sources. Fortunately, the Bankruptcy Code exists to show people a path toward a more stable financial future.
Unfortunately, people often fall into common traps regarding their abilities and options immediately prior to filing bankruptcy, including:
- Building new debt: Whether this is tapping into a home equity line, running up a credit card, or scheduling expensive medial or dental procedures, it is a bad idea. Once they receive the notice of your bankruptcy, your creditors can challenge the request to eliminate some or all your debt. Generally, any purchases made 90 days before your filing are not included in the bankruptcy. To be safe, once you decide that bankruptcy is the right option, you should cease any unnecessary spending.
- Lying about assets: The first step in filing bankruptcy is completing a “means test” to determine whether you can file Chapter 7. Individuals might be tempted to lie regarding their assets to improve their eligibility. If these untruths are uncovered, you could be banned from filing on those debts ever again. Since the bankruptcy trustee will have access to the totality of your files, it is unlikely your attempted deception will go unnoticed.
- Giving assets to family members: Many individuals worry that certain assets will be liquidated and used to pay off creditors. To block this, people might choose to give property, vehicles, jewelry or electronics to friends or family members for safekeeping – to be returned at a later date. These activities will be quickly uncovered, and the assets must be surrendered.
It is wise to seek the advice and guidance of an experienced bankruptcy attorney. Since every situation is different, it is best to find a solution that is specifically tailored to your unique situation.