5 Mistakes to Avoid When Filing for Bankruptcy



When you find yourself in a difficult financial situation, you may consider various debt-relief solutions. Before you file for bankruptcy, it’s important to consider certain matters and avoid some common pitfalls. 

This blog will cover key reasons your bankruptcy application may get denied, and how a bankruptcy lawyer can help you navigate the complex application/appeal process.

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Common mistakes to avoid

You may decide to proceed with bankruptcy filing if you’re unable to repay debts even after reviewing all other debt discharge options. However, be aware of these common mistakes that may hamper your chances of success.

1. Hiding assets or debts

A Statement of Affairs is one of the bankruptcy documents you submit to the bankruptcy court wherein you list all the assets you own, creditors you owe money to, and your monthly budget. Don’t provide incomplete or inaccurate information about your assets, debts, income, and expenses. If you misrepresent your financial information, your debt discharge may be affected and you could be subject to criminal prosecution for fraud.

2. Not listing all creditors

Include every debt in your bankruptcy filing. You may find it difficult to keep a track of all creditors or may want to keep certain creditors out of your bankruptcy case. This can jeopardize your chances of discharging certain debts.

3. Selectively repaying loans

It may be deemed a “preferential transfer” if you pay back loans to friends or relatives (within one year of filing) or even other creditors (within 90 days). In such cases, the trustee may file an adversarial proceeding to get the money back from these preferential creditors and distribute it equally among all of your creditors.

4. Filing before receiving substantial assets

Don’t file bankruptcy if you’re about to receive an inheritance within one year, a lawsuit settlement, a significant income tax refund, or a loan repayment. You could rather use this money to settle with creditors and get out of debt on your own.

5. Transferring or selling property fraudulently

Make sure you’ve not sold, transferred, or disposed of any assetslife insurance, stocks, bonds, real estate, or vehicleswithin the last five years of filing for bankruptcy. If you do so, you may be denied debt discharge and may even be subject to criminal penalties.

Connecting with a bankruptcy lawyer may help

Bankruptcy law is too complicated to understand. Even a slight mistake of not revealing little details can make you pay heavily and result in criminal charges. If you’re considering a bankruptcy filing, it’s best to seek legal representation to evaluate all your options. An expert bankruptcy lawyer can help you to recognize the qualification criteria, and choose the correct chapter to file.

Put an end to searching “bankruptcy lawyers near me” and contact LegalASAP for an experienced bankruptcy lawyer. They can help you navigate the cumbersome legal formalities. Ready to see if you may qualify? Take the free online bankruptcy case evaluation now.