Bankruptcy: Don't Make These Mistakes When Filing

Do you need to resort to bankruptcy to get yourself out of debt? If so, you want the process to go as smoothly as possible. It will help to avoid making these mistakes that can cause problems with the bankruptcy process.

Taking On New Debts

There will be a period of time where you decide that you need to file for bankruptcy and when you actually start the process. Do not use this as an opportunity to take on new debts that you have no intention of paying off. If you do take on new debts, there could be big repercussions if you are caught. The debt will not be discharged and you will be responsible for paying it back in full.

If you think it will be difficult to prove that you had no intention of paying back the debt, think again. There are some general guidelines used to classify debts from right before a bankruptcy filing. Purchases that are necessities, such as groceries purchased on a credit card, could be viewed as a regular purchase and still qualify for being discharged. Other purchases do not have the same leeway.

Anything that is considered a luxury purchase will be heavily scrutinized if it was made before filing for bankruptcy. The same applies for very large cash advances. Make sure you understand what the time limits are for these debts in your state, as well as the threshold for cash advances that cannot be discharged.

Paying Back Selective Creditors

Are you worried about a certain creditor not getting paid for the work they did for you? Know that you will not be able to play favorites when paying back debts before filing for bankruptcy. That sort of behavior is considered a preferential transfer, and could result in the payment being clawed back from the creditor. 

Part of the bankruptcy filing is to ensure that all creditors are treated equally. Debts that cannot get discharged will need to be paid back through asset liquidation, while the remaining debts go away. Make sure you understand the limits on preferential payments so that your creditor does not have their payment taken away from them after filing.

Need help navigating all of the rules regarding bankruptcy? Meet with a local lawyer in your area that specializes in these cases. They'll ensure that you are doing everything by the books and do not make mistakes along the way. To learn more, contact attorneys like Greg Dunn Bankruptcy Attorney.