Bankruptcy is a serious matter and no matter how handled it can have a lasting impact on your life for years to come. If handled properly that impact can be positive, but if not handled correctly the impact can make matters worse.
There are mistakes around filing for bankruptcy that can be enticing and easy to make. These missteps may seem like possible solutions or simply errors caused by unfamiliarity with the bankruptcy process. Being aware of common mistakes to avoid can help make the entire process go smoothly and efficiently. Here are the top 10 mistakes people make when filing bankruptcy.
1. Working with a Bankruptcy Mill
When a law firm specializing in bankruptcy quickly turns around a high volume of cases with an emphasis on quantity instead of quality this is typically regarded as a bankruptcy mill. Hallmarks of a bankruptcy mill are a disproportionate amount of cases to attorneys and lack of personal attention. Large law firms are not always a bad idea, but if the attorneys are unable to give your case their undivided attention you will not receive the best service.
2. Hiring an Attorney Who Specializes in Another Area
Experience matters and whatever your legal needs it is always best to hire a lawyer who specializes in that area. An excellent real estate lawyer is not a good fit to handle bankruptcy proceedings for the same reason you would not want a bankruptcy lawyer overseeing a real estate transaction. The law is complicated and always changing, and it is in your best interest to have a lawyer on your side who is up-to-date and understands the specifics of bankruptcy law.
3. Hiring a Paralegal Service
A paralegal is no substitute for a lawyer. When someone is trained as a paralegal they may have insight and understanding as to the bankruptcy process, but ultimately, they are not an attorney. A well-intentioned paralegal may try to guide you through the process, but if a mistake is made you will be left with no recourse.
4. Withholding Information Concerning Debt
Filing for bankruptcy is no time to keep secrets. Full disclosure is absolutely necessary. Holding back information limits your attorney’s ability to help you. Failing to list creditors and debts can also get you into trouble with the court and impact proceedings.
5. Withholding Information Concerning Assets
Just as disclosing all debt is necessary it is equally important to list all of your assets. Anything your name is tied to must be listed. From vehicles to property to financial accounts it is important to list everything. Failure to list all assets can result in criminal bankruptcy fraud charges, and make a bad situation even worse.
6. Transferring Assets
Transferring assets right before filing for bankruptcy seems like a great idea. By putting assets in the name of a trusted friend or relative you may think the assets cannot be sold to pay back creditors; except that is not how things work. Transferring assets is essentially trying to hide them in plain sight, and can result in criminal charges for you and possibly whoever you transferred the assets to.
7. Waiting Too Long to File Bankruptcy
As soon as there is the first inkling of a problem it is important to get in touch with a bankruptcy attorney. Filing for bankruptcy can only impact your situation going forward; this filing cannot change things that have already happened. When wages are garnished or a bank sells a home those actions cannot be undone. In these instances, filing for bankruptcy will not get your money or home back once they are gone.
8. Filing Bankruptcy Too Soon
Filing bankruptcy too soon can be equally troublesome. In some instances, waiting a few more days or even a few more weeks can matter. An experienced bankruptcy attorney with knowledge of laws and timing will ensure deadlines are not missed that could result in the discharge or forgiveness of debt.
9. Making Preference Payments
It can be really tempting to pay back family or friends before filing bankruptcy, but wait. Courts can go after your loved ones to get that money to ensure all of your debtors are paid back in a manner that is equitable and fair.
10. Going on a Shopping Spree Right Before Filing
Racking up more debt in anticipation of having everything discharged is irresponsible. There is no such thing as free money. Creditors will likely notice the additional debt and you will have to pay back the last-minute credit card charges.
Ultimately the most important thing to do when bankruptcy is looming is to find a qualified bankruptcy attorney you trust, be upfront with your attorney and follow their direction and advice. The process is not always easy, but there are some common pitfalls that can make bankruptcy filing worse. Knowing the mistakes to avoid will help you navigate your way and enjoy a positive outcome.