When faced with a dire financial situation, more people than you may think turn to bankruptcy as the best solution.
According to the United States Courts, 378,953 people filed for Chapter 7 bankruptcy in 2020. While it provides relief, you need to stay diligent during the process and avoid doing the following three things.
1. Hide information
The courts need accurate and complete information from you, including all of your debts, assets, expenses and income. If you do not disclose everything, you not only risk your bankruptcy getting dismissed and potential perjury charges. A bankruptcy fraud conviction comes with steep consequences, including a potential five-year jail term and fines of as much as $250,000.
2. Incur more debt
While having one last hurrah has its temptation, using credit for anything but life necessities only come with added headaches. Any extravagant purchases, such as vacation or buying a new car, within 90 days of filing will cause your creditors to pause. At that point, the creditor has the right to challenge the amount you owe. In general, do not use credit cards at all during that time period.
3. Transfer assets
Having assets does not automatically mean you will lose them. If you transfer assets or put them in someone else’s name, it almost guarantees their loss. Again, doing so creates a suspicion of dishonesty and potential legal problems. If your situation has required you to sell something during the bankruptcy process, you can expect that you will need to provide solid documentation for its purposes, such as covering rent or other necessary expenses.
Although bankruptcy comes with challenges, taking an honest and straightforward approach makes the process go more smoothly.