Whether you have lost your main source of income, suffered injuries or illnesses that are preventing you from working, or accrued an enormous amount of debt that you realistically cannot afford, filing bankruptcy could be an option to regain back control of your finances. Unfortunately, the bankruptcy process is a legal one, which is not only serious, but also overwhelming without proper understanding. If you are filing bankruptcy, here are a few mistakes you must avoid.
Not Disclosing All Assets
During an initial bankruptcy consultation, your attorney will determine if you are eligible by conducting a mean's test. Basically, this test will look at all of your debts and living expenses, comparing them to your current income and assets.
If you have a sufficient amount of income and assets to cover the debts and your other expenses, you will not pass the mean's test that qualifies you to file chapter 7 bankruptcy. There are other options available, though, such as chapter 13, which is a bankruptcy that allows you to repay portions of your debt over a period of time.
No matter what type of bankruptcy you qualify for, you need to disclose not only your total debts and living expenses, but also all of your income and assets. If the courts find out about the income and assets you were trying to hide, your bankruptcy will be dismissed. In some cases, you may face legal charges.
Increasing Your Debt After Filing
Another mistake to avoid is increasing the total amount of debt you have. For example, many people will make excessive purchases using their current credit cards because they know the bankruptcy will be discharging the debts. Or, you may apply for credit at stores or other banks before the bankruptcy is finalized.
Increasing your debt once you have started the process of filing for bankruptcy can be challenging. Most courts and creditors believe this is a type of fraud. Creditors may refuse to eliminate/discharge the debt, which will result in you having to pay back the debts even though you hoped they would be discharged from your credit report and financial responsibility.
Finally, it is imperative that you understand what bankruptcy can and cannot do before you file. This is especially important because bankruptcy will not discharge certain debts.
Student loans, child or spousal support payments, and even tax debt will most likely not be discharged even though you are filing bankruptcy. Knowing this beforehand will help you develop a budget that is realistic and effective. Speak with a local bankruptcy law firm for more information.Share