If you’re struggling under crippling debt and considering filing for bankruptcy, there’s more to your case than simply filling out a few forms, filing them with the court, and walking away from your debt. In fact, there’s a pretty substantial amount of preparation that has to go into your case to make sure your bankruptcy is a success. Preparation goes far beyond simply making a list of your assets and getting copies of your financial documents—it also includes avoiding several mistakes that can wind up hurting your filing in the long run.
Provide Dishonest Information
When you fill out your bankruptcy paperwork and attend your meeting of creditors, you’ll be required to disclose information that is both completely and accurate to the fullest extent of your knowledge. You’ll make your statements in both of these instances under penalty of perjury, meaning if you disclose false information and are discovered, you could wind up facing criminal charges as well.
Fail to File Your Taxes
You’ll need to make sure your tax returns for at least the last two years are in good order before filing for bankruptcy. If they’re not in order, it makes filing for Chapter 13 bankruptcy nearly impossible. Tax returns are crucial to determining your past and present earnings and asset holdings, and it’s impossible to learn your tax obligations until you actually file properly.
Acquire New Debt
If you acquire a ton of new debt in the time leading up to your filing for bankruptcy, odds are your creditor will object to the discharge of the debt, alleging that you obtained the debt with no intention to pay it back. Doing so is considered fraud, and you could wind up having your discharge denied. Bankruptcy is intended to help people who have fallen into circumstances beyond their control; obtaining a bunch of debt from things like luxury purchases is not usually seen as circumstances beyond your control.
Ignore Collection Actions
If you’re filing for bankruptcy, your creditors likely don’t know that. If you ignore collection actions because you’d rather file for bankruptcy, your creditor may take actions to garnish your wages, repossess your car, or even foreclose on your home. Don’t ignore your creditors—let them know you intend to file bankruptcy instead. You should also give them the contact information for your Richmond bankruptcy attorney as they’ll be representing your best interests.
File Before You Receive Assets
If you’re going to be receiving a substantial amount of money within the next year, such as a large inheritance, a loan repayment, or tax refund, you may be able to get out of debt on your own with minimal damage to your credit. You should speak with your attorney about any income you know is headed your way before taking any actions.
Some people try to hide assets from their creditors by moving them, such as transferring them for safekeeping, selling them off, or even stashing them in a secure, exempt fund (such as retirement benefits) before filing for bankruptcy. Hiding assets is criminal and could lead to penalties. However, selling assets or property to try to pay off your debts isn’t necessarily criminal. Talk to an attorney about your state of affairs and find out how you should proceed with any assets you may have.