Filing for bankruptcy is a big step that requires careful consideration and attention to detail. Any mistakes made during this process can have long-lasting consequences for your financial future.
If you are considering bankruptcy as a solution, there are a few common mistakes you will need to avoid.
Ignoring eligibility requirements
Make sure you meet the eligibility criteria to file for bankruptcy. Each type has specific requirements regarding income, debt and assets. If you fail to meet these requirements, the court could dismiss your case or convert it to a different type of bankruptcy.
Not attending credit counseling
As part of the process, individuals are typically required to attend credit counseling sessions. Skipping these sessions or not completing the required coursework can cause delays.
Failing to disclose all assets and debts
Honesty is important when filing for bankruptcy. Not disclosing all assets and debts can lead to serious consequences, including facing accusations of fraud. Make sure to provide accurate and complete information about your finances to the court.
Liquidating retirement accounts
Some individuals mistakenly believe they must liquidate their retirement accounts to pay off debts. During bankruptcy proceedings, creditors often cannot access retirement accounts. Before tapping into your retirement savings, consult with a financial advisor to explore other options.
Incurring new debt before filing
Taking on new debt shortly before filing can raise red flags with the court. Creditors or the bankruptcy process may see it as an attempt to defraud or abuse. Avoid incurring new debt, such as making large purchases or taking out loans, before filing.
By avoiding these common mistakes, you can navigate the bankruptcy process more smoothly.