When you are drowning in debt, it can put immense stress on you and even keep you up at night. However, you may have the option of filing for bankruptcy. It can wipe out most of your unsecured debt and give you a fresh financial start. It’s important to fully educate yourself about bankruptcy, though, so that you avoid making costly mistakes.
Here are some common mistakes you should avoid:
Using Your Credit Cards
Some people make the mistake of maxing out their credit cards right before they file for bankruptcy. They assume all their debt will be wiped out anyway, so they don’t think there’s any harm in using their credit cards. The truth is, however, that credit card purchases made within 90 days of filing for bankruptcy won’t be wiped out. You will be responsible for paying that money back to your creditors.
Thinking That Bankruptcy Will Relieve All Your Debt
A misconception some people have about bankruptcy is that it will wipe out all of their debt. This isn’t the case. Bankruptcy can only wipe out unsecured debts, like credit cards and medical bills. It won’t relieve student loans, tax debt and child support payments. If you any of those debts, you will still be responsible for paying them back.
Transferring Assets Out of Your Name
Some people try to transfer a home or other asset into a family member’s name just before filing for bankruptcy. They think doing this will prevent anyone from going after their assets. However, if the courts find out that you intentionally tried to transfer assets out of your name, they will consider it fraud and you may be charged with criminal penalties.
Filing Under the Wrong Chapter
It’s important to understand that there’s two types of bankruptcy: Chapter 7 and Chapter 13. While they both give you the chance to work your way out of your debt, they have many differences. The type of bankruptcy you choose will depend on your unique circumstances, such as the kind of debt you have and how much you owe in total.
Repaying Family Before Filing
If you have borrowed money from family members, it is understandable that you want to pay them back as soon as possible. However, if you try to repay the before you file for bankruptcy, the trustee may see the payment as preferential and not allow it.
Not Hiring a Bankruptcy Lawyer
Filing for bankruptcy isn’t exactly a simple process. It involves a lot of paperwork and can take a long time to complete if you don’t have any professional help. That is why it is in your best interest to work with an experienced bankruptcy lawyer Tampa, FL offers. A lawyer can help you choose the right type of bankruptcy for your needs and guide you through the entire process.
Thank you to our friends and contributors at The Law Office of Michael A. Ziegler Law, P.L. for their insight into bankruptcy and mistakes to avoid.