People declare bankruptcy for a variety of reasons. Perhaps you’ve gone through a costly divorce or are dealing with a medical condition that has left you with a huge medical bill. Or, you’ve lost your job and have since fallen behind on your mortgage or credit card payments. These are just some of the reasons why you might consider declaring bankruptcy.
Bankruptcy can be a welcome relief when you are caught up in debt. However, certain mistakes can hurt your bankruptcy case and your quest for debt relief. Here are common yet costly mistakes you want to avoid when declaring bankruptcy:
Filing the wrong bankruptcy petition
There are generally two types of personal bankruptcies: Chapter 7 and Chapter 13. However, these bankruptcies are not created equal. As such, it is important that you declare the right bankruptcy based on the debts you are hoping to discharge.
Basically, Chapter 7 bankruptcy is designed for people who are looking to discharge unsecured debts like medical bills and credit card debts. Chapter 13 bankruptcy, on the other hand, is meant for restructuring a payment plan for secured debts such as mortgages and car loans.
Waiting too long to initiate the bankruptcy process
If you default in paying your debts on secured items, say your car loan or mortgage, things can spiral out of control pretty quickly. Your delinquent debts could end up going to collections, which might mean things like having your vehicle repossessed or going into foreclosure.
The longer you wait, the bigger your financial woes will be. Clearly, you don’t want this to happen. As soon as it is clear that you are struggling to pay your debts, you need to start exploring your options.
The decision to go bankrupt is one that you should treat with the seriousness it deserves. Learning as much as you can about bankruptcy can help you avoid costly errors down the road.