Filing for bankruptcy can provide you with the fresh start you need by discharging some of your debt. Without financial obligations holding you back, you can reorganize your finances and bounce back from your current situation.
However, there are certain mistakes you must avoid to enjoy the benefits of bankruptcy, as discussed.
Choosing the wrong bankruptcy
Individuals mostly file for either Chapter 7 or Chapter 13 bankruptcy. Depending on your end objectives, you must file the right kind of bankruptcy. For instance, while Chapter 7 aims to liquidate non-exempt assets, Chapter 13 is more into restructuring the debts owed and coming up with a payment plan.
Maxing out credit cards
Credit card debt is dischargeable in bankruptcy. However, if you make a major purchase or run your credit card up to the limits just before filing for bankruptcy, such an expense can be considered to be in bad faith and won’t be discharged in your bankruptcy.
Transferring property to another party
Some people transfer property to other parties like friends and family to keep them away from the bankruptcy process. However, it is not advisable to do so. You may get in trouble for fraud if you hide assets or transfer them to other parties in the lead-up to filing for bankruptcy.
Making the most of the bankruptcy process
No matter the type of bankruptcy you wish to file, it is crucial to avoid doing anything that may come back to haunt you. These are just some of the common mistakes many make that end up affecting or derailing their bankruptcy.
It’s wise to seek assistance on what you need to do before filing for bankruptcy. That way, you will be better placed to safeguard your interests and avoid these pitfalls.