Despite the social stigma attached to it, bankruptcy is one of the best tools that can help you get rid of your debts, say lawyers of Dallas based bankruptcy law firm Recovery Law Group. People who file for bankruptcy eventually end up in a better financial situation than those who don’t. Thus, if you are struggling with debts and are contemplating bankruptcy, there are a few things you should avoid doing.
- Avoid adding new debts to list
In case you are going to file for bankruptcy, you should stop adding to your debts. Getting a new credit card or a new loan prior to a bankruptcy filing can be considered as an attempt to dupe the creditor of money. This will reflect poorly on your bankruptcy application. In case the court rules against you, your bankruptcy case will be dismissed, and you will be stuck paying all those debts.
- Stop paying creditors
Any big or unusual payments to creditors will come under scrutiny if you file for bankruptcy. Despite your intention as trying to pay off as much debt as possible before bankruptcy, the act may be of preferential payment, especially if the creditor is family or friend. The court finds it favoring one creditor over another or trying to hide assets. the payments are usually upturned, and the money becomes part of the bankruptcy estate, to be distributed amongst all creditors.
- Hiding information can be bad
While filing for bankruptcy, you are expected to provide information regarding your debts and assets. Hiding financial details or assets in order to protect them will reflect badly on you when they are discovered, and they usually are discovered. Such activity is seen as fraud and might result in the dismissal of the bankruptcy case and/or criminal charges.
- Expecting inheritance? Delay filing
If you are expecting some inheritance as will, insurance claims, tax refunds, etc. then you should avoid bankruptcy filing for some time. you can use this money to pay off some of the debts instead of opting for bankruptcy (it has ill effects on your credit score). Additionally, if you have already filed for bankruptcy, any inheritance that you receive will become part of your bankruptcy estate and can be used to pay your creditors.
- Pay your routine bills
Unless you are up to your neck in debt, make payments for essentials like gas or electricity. However, you need to avoid making luxury purchases just a few months prior to a bankruptcy filing. Similarly, transferring any property to family and friends before filing bankruptcy papers also attracts the bankruptcy court’s attention. These are considered fraudulent activities that can get your bankruptcy case dismissed without discharging any debt.
- Don’t touch your retirement funds
Retirement funds like IRA, 401(k), etc. are generally exempted in bankruptcy exemptions provided by federal or state governments. Using money from these accounts to pay off debts like medical bills or personal loans (debts which will be discharged in bankruptcy) will be throwing your money down the drain. Bankruptcy exemptions protect money in these accounts making your future safe while you can get rid of unsecured debts like credit card bills through bankruptcy.
To know more about chapter 7 or chapter 13 bankruptcy, you can call 888-297-6023 to talk with experienced bankruptcy lawyers.