Mistakes People Make When Filing for Bankruptcy

If you’ve been considering bankruptcy, you have probably encountered online services that encourage debtors to file for bankruptcy on their own. This can be tempting, especially if you think that since you’re already in bankruptcy, you have nothing more to lose. However, nothing could be further from the truth. Debtors who don’t understand the law are bound to make mistakes that hurt them. And, as the following examples illustrate, you still have a great deal you can lose.

Common mistakes debtors make when filing bankruptcy include:

• Repaying loans from family and close friends — Many debtors who file for bankruptcy still want to repay people close to them who have loaned them money. This is commendable, but doing so before your bankruptcy filing is only going to cause trouble. Paying off “insiders” prior to filing for bankruptcy is generally interpreted as an attempt to defraud other creditors. It’s especially suspicious if you have no record of the personal loan between you and Uncle Elmer, because it just looks like you’re trying to hide assets.

• Continuing to run up debt — If you keep charging to your credit cards, or worse yet open a new charge account, in the weeks before filing for bankruptcy, it will appear to the court that you never intended to repay the money. That’s fraud. The bankruptcy court will not discharge that debt, so you will still be on the hook.

• Selling exempt assets to pay off debt — State and federal law allows you to exempt different amounts of certain assets, including personal property and funds in certain savings accounts. Even in Chapter 7 proceedings, the bankruptcy court does not take control of these assets and liquidate them to pay your creditors. By selling your car or jewelry, you are giving away goods you could have kept to pay debt that would have been discharged.

• Taking out a mortgage to pay dischargeable debt — If, for example, you took out a second mortgage to pay medical bills, you’d be taking out secured debt to pay off potentially dischargeable debt. If you later decided you had to file bankruptcy, you would be stuck with the mortgage, whereas you could have walked away from your medical bills.

• Leaving out creditors — If you forget to list a creditor on your bankruptcy filing, or omit them deliberately because you haven’t heard from them in a while, you could be setting yourself up for trouble. After the court finalizes your bankruptcy, that unnamed creditor could reappear and attempt to collect, as long as the statute of limitations hasn’t run out on your debt. You’ll be stuck with the debt, having squandered your opportunity for relief through bankruptcy.

Law Offices of Carol M. Galloway, P.A. offers personalized bankruptcy services to help you avoid these mistakes and get the maximum protection under the law. If you’re wondering whether bankruptcy is right for you, call our firm at 904-307-4579 or contact us online to arrange your consultation.