Sometimes bankruptcy happens to the best of us. It’s an unfortunate reality that even if you are responsible with your finances, you still might find yourself on the receiving end of a bankruptcy case. Over one million families are forced into bankruptcy as a result of medical bills that are impossible to ever pay back. Sometimes the best laid plans go awry and your business endeavors or once-stable work suddenly disappear, and even though you’ve made good financial choices, you suddenly find yourself in need of a bankruptcy attorney. It happens. Life goes on. You’ll bounce back.
Your bankruptcy might be a serious bummer, but there are a few mistakes that could quickly take your case from “major bummer” level to “catastrophe.” We want you to avoid these common pitfalls, so we’ve put together a list of mistakes you should make sure to avoid.
Four Common Mistakes Your Bankruptcy Lawyer Wishes You Would Stop Making
- MISTAKE: Being disorganized or dishonest with the information you provide.
When your bankruptcy judge decides on a settlement and writes off a portion of your debt, there is a measure of good faith extended to you. That good faith hinges on you being honest about your income, assets, and debts.
If you don’t have your paperwork in order when you file, it adds a nightmare to your already unfortunate situation. If you forget to list one of your debts in the bankruptcy paperwork, that debt might not be satisfied in the settlement. It is heart-wrenching to give up everything to get yourself out of the dark whole of debt, only to realize that you still owe thousands of dollars because you left a bill off the list. If you forget to list an asset, your entire bankruptcy could be dismissed.
Not only will the outcome of your bankruptcy be less favorable if you forget to list an asset, you could actually end up behind bars. When you fill out the paperwork for you bankruptcy, you’re making a sworn testimony. Anything that isn’t truthful about your bankruptcy is technically perjury, and could lead to criminal prosecution. The point is, when filing bankruptcy, you need to be on the up and up and you need to be organized.
- MISTAKE: Not Filing Your Taxes Prior to Filing Bankruptcy
Sometimes when your finances turn into chaos, it feels too overwhelming to take care of your taxes. What’s the point anyways, right?
Many people do not realize that you cannot file for bankruptcy if you are not current on your taxes (or at least current on the last two cycles of taxes). Your tax returns are a crucial part of your bankruptcy proceedings, in determining your assets and income, as well as adding your taxes to the list of your debtors. If you don’t have the previous two years of taxes, you likely won’t be able to fill out any of the paperwork to begin with, but even if you can, your bankruptcy judge will likely dismiss the claim altogether.
Before filing your taxes, you want to start by getting current on your tax returns. We know it’s painful, but it’s a crucial step in putting your bankruptcy behind you and getting on with a productive life.
- MISTAKE: Getting Yourself Into New Debt
Help us help you: Do not make purchases greater than $600 or take cash loans greater than $875 in the three months prior to your bankruptcy. If you make a big purchase or take out a big cash loan right before you file bankruptcy, your creditors will make a (very plausible) claim that you made those purchases knowing you were going to file bankruptcy and had no intention of repaying them. If this argument is successful, at best, your entire bankruptcy request will be denied. At worst, you could find yourself in the middle of fraud charges.
- MISTAKE: Abandoning Your Debts Before the Bankruptcy is Final
Another common mistake that people make while filing bankruptcy is to stop making payments on their bills, and stop answering the phone when creditors call. This is bad news. If your creditor goes through the trouble of garnishing your wages for repayment of your debt, that won’t be reversed in your bankruptcy!
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