If you are grappling with an overwhelming amount of debt, one of the most important decisions you can make is declaring bankruptcy. If you get it right, bankruptcy can give you the much-needed relief so you can get back on your feet, financially speaking. If you get it wrong, however, bankruptcy can compound your troubles.
Before you can discharge your debts and secure that clean slate, you will need to navigate a complex legal process. And this means that you will be susceptible to making costly mistakes.
Here are common mistakes you need to steer clear of when declaring bankruptcy.
Attempting to hide assets
You will need to be as forthright as possible while filing for bankruptcy. This means that you will need to be absolutely honest when completing the paperwork. Any attempt to misrepresent facts or hide assets amounts to bankruptcy fraud, and this can impact the outcome of your case. In fact, hiding assets is considered bankruptcy fraud, and the consequences can be quite costly.
Filing the wrong type of bankruptcy
There are two main types of personal bankruptcies: Chapter 7 and Chapter 13 bankruptcies. Chapter 7 bankruptcy is meant for discharging unsecured debts such as unpaid rent, utility bills, medical bills and personal loans. Chapter 13 bankruptcy, on the other hand, is designed for discharging debts such as government fines, forfeitures, debts arising from divorce or separation or debts arising from malicious destruction of property.
The bankruptcy court will refuse your claim if you file under the wrong chapter.
Incurring debts after initiating the bankruptcy process
As soon you make up your mind to declare bankruptcy, it is in your best interest that you avoid incurring additional debt. This is not the time to charge up your credit card or sign up for a payday loan. Incurring debts that you do not intend to pay back can land you in trouble with the law.
A number of circumstances can prompt you to declare bankruptcy. When bankruptcy becomes inevitable, it is important to avoid costly mistakes that can derail your quest.
