There are many reasons why you may need to file bankruptcy. In many cases, you have accumulated a large amount of debt you cannot realistically afford. Or, you may have lost income due to losing your job or being unable to work because of a medical condition. Either way, it is easy to see why bankruptcy can be beneficial.
Unfortunately, navigating the bankruptcy process can be a bit confusing. Because of this, many consumers make mistakes that can be costly and even illegal. If you are considering filing chapter 7 bankruptcy, here are a few mistakes you need to avoid.
Working with a Standard Lawyer
In regards to bankruptcy, all lawyers are not the same. Working with a standard lawyer may seem sufficient, but you really need to hire a lawyer that specializes in bankruptcy law.
Bankruptcy law attorneys not only understand your state's specific bankruptcy and consumer laws, but they are also familiar with the appropriate legal steps to take when navigating the bankruptcy process. This ensures you are not only filing in a way that benefits you, the consumer, but that you are also filing in the most effective, efficient, and legal manner possible.
Using a "bankruptcy mill" is also a mistake for many people. This type of service does offer legal assistance that specializes in bankruptcy, but the legal professionals who work at these mills deal with numerous clients. Therefore, a mill will not guarantee personal service, which is necessary when handling your personal financial matters.
Not Listing All of Your Assets
Full disclosure is imperative when filing bankruptcy. Your attorney will ask you many questions during the initial consultation, and you should be open and honest especially when it comes to listing all of your assets.
Assets include a wide array of things. Furniture, electronics, vehicles, cash, stocks, bonds, jewelry, collectibles, precious metal, guns, and even cryptocurrency are all assets that must be disclosed during the bankruptcy process. Of course, real estate is also an asset that should be disclosed.
Many people will lie about these assets, saying they forgot about them. Others tend to transfer assets into a friend or family member's name in hopes of retrieving them about the bankruptcy is finalized.
Failing to disclose ALL of your assets can lead to serious penalties. Not only will your debts NOT be discharged, but you may also face criminal charges if the bankruptcy courts do find out about these assets.
Not Disclosing All Creditors
Full disclosure does not only pertain to your assets. Disclosing all of your creditors is also important when filing bankruptcy.
The list of creditors must be given to the courts so they can notify each of your creditors about your bankruptcy. This will help them understand that the bankruptcy proceedings have started, but it will also help you since creditors will be unable to call and try to collect on the debts.
Many people will forget to list debts that the bankruptcy will not actually discharge, such as student loans and child support debt. Even though these debts will not actually be discharged, they must be legally listed on the "mailing matrix."
Leaving some creditors off the list can be more severe than others. For example, debts that are not linked to personal property, such as credit cards and medical bills, are unable to retrieve property in a non-asset bankruptcy.
If you forget to list a secured creditor, such as an auto loan, you may be at risk of losing the property. Even though the auto loan will not be discharged in a chapter 7 bankruptcy, the loan may be surrendered, reaffirmed, or reorganized in a manner where you can afford it.
Filing bankruptcy can be a great way to reorganize your financial health, but a proper understanding is essential. This guide will help you avoid the most common mistakes made during the bankruptcy process.