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Common Mistakes With Bankruptcy

It’s a known reality - mistakes happen every day. While most try to avoid conducting these types of actions, when completing paperwork or other critical documents, making a mistake could be costly in more ways than one.

For those considering filing for bankruptcy or amid a bankruptcy case, some mistakes, whether intentional or not, could drastically impact their situation.

Before Filing for Bankruptcy

Lying About Assets

This is one of the most common mistakes made when applying for bankruptcy. Hiding assets or lying about them can result in an application being denied or the case being dismissed. This includes those who, whether purposefully or not, transfer assets to family members or friends. The court may deem it a fraudulent transfer and an individual could face serious penalties.

Not Disclosing all Debts

Similarly, failing to list all debts on a bankruptcy petition could appear as an effort to keep them out of a bankruptcy estate. This can include secured and unsecured debts, such as credit cards, medical bills, personal loans, etc.

Putting Debts on a Credit Card

In some cases, people will try to put their debts on a credit card to keep them out of bankruptcy. However, this is not allowed and could result in a case being dismissed.

Not Filing Taxes

If an individual owes taxes, they must include it in the bankruptcy petition.

Dipping Into a Retirement Account

Those considering getting funds from their retirement account should only do this as a last resort. Individuals will have to pay taxes on the money withdrawn, but they will also end up losing some of their hard-earned savings that would be needed in the future.

Failing to Complete Mandatory Courses

To have a bankruptcy case discharged, an individual must complete two mandatory courses: pre-filing credit counseling and post-filing debtor education. These courses provide important information about bankruptcy and help ensure that individuals make the best decisions for their financial future.

Not Following the Rules

Several rules must be followed in order to file for bankruptcy successfully. These rules include only filing for bankruptcy once every eight years, obeying the automatic stay, and more. A bankruptcy case could be immediately dismissed if these and similar rules are not abided by.

Not Updating Personal Information With the Court

An individual needs to keep the bankruptcy court updated on any changes in their financial situation. This includes getting a new job, selling property, or incurring new debts.

After Bankruptcy is Discharged

Not Following Through

Once a bankruptcy case is complete, the individual needs to follow through with their financial goals. This means things like sticking to a budget and paying bills on time. If they do not follow through with these actions, they could find themself in financial trouble again down the road.

Failing to Rebuild Credit

Comparably, because a bankruptcy case is over doesn't mean that an individual’s financial problems are solved. They will still need to work on rebuilding their credit and establishing good financial habits if they want to be successful in the future.

Failing to Make Payments

If a petitioner is required to make payments under a bankruptcy plan, such as a Chapter 13 repayment plan, they must make those payments on time. A case could be dismissed because of this, which can be frustrating, especially if the individual was close to being out of bankruptcy.

Not Reviewing Their Credit Report

After bankruptcy, an individual needs to review their credit report to ensure that all applicable debts were discharged. If they find any errors, they should dispute them with the credit bureau.

Hiring the Right Bankruptcy Attorney

Before taking the first step toward filing for bankruptcy, another mistake many individuals make is not hiring the right bankruptcy attorney. An experienced bankruptcy law firm will have a compassionate and knowledgeable team who can help those facing financial struggles and guide them towards the best possible outcome for their case.

The attorneys at Licata Bankruptcy Firm are ready to work for you. Contact our Springfield office today, online or by phone. (417) 213-5006