Declaring Bankruptcy? 5 Mistakes to Avoid

Thursday, February 25, 2016, 6:00 AM | Leave Comment

Bankruptcy is a stressful event. Many people, however, misinterpret the purpose of the bankruptcy laws and mistakenly believe that by filing they are somehow foreclosing on their financial future.

The reality is that bankruptcy is just as often a chance to rearrange finances as it is a liquidation of assets.

With that in mind, here are five mistakes to avoid when declaring bankruptcy.

  1. Which Chapter?

    If you are considering bankruptcy, you should be aware there are many different kinds of cases.

    • A Chapter 7 bankruptcy is what most people imagine when they hear the word “bankruptcy.” It is the type of case where a debtor’s assets are liquidated and sold off to cover as much of the creditor’s debts as possible.

    • The more obscure version is a Chapter 13 bankruptcy, which gives an individual consumer an opportunity to reorganize their debts and come up with a plan to pay off creditors over time.

  2. Dumping Assets

    If you are considering filing for bankruptcy protection, selling your assets in advance of either filing the case or having your case adjudicated could have wide-ranging legal ramifications.

    In fact, it may prevent you from filing altogether. From the very moment you begin considering filing any kind of case or even discussing it, find a qualified bankruptcy attorney. Avoid making any major decisions until then.

  3. Parallel Plans

    Making unauthorized payments or distributions of your assets or even making an agreement to do so before or during your bankruptcy case could subject you and your business (if one is involved) to a variety of legal sanctions.

    The entire point of filing a bankruptcy is to gain access to the orderly processes of the court and let the judge guide your case to a successful conclusion.

    Going off on your own and making agreements with creditors or any other involved party is only going to delay or thwart that process.

  4. Entertaining Other Legal Process

    One thing your attorney will remind you is that a bankruptcy puts an automatic stay on all legal cases associated with your assets and business interests (if there is a business involved).

    No plaintiff can advance litigation, enforce an order or execute a judgment if you have filed bankruptcy. They are required to petition the bankruptcy court for consideration. Don’t waste time defending against these cases. Concentrate on bringing the bankruptcy to a successful conclusion.

  5. Failure to Disclose

    It is vital that every dime be accounted for in a bankruptcy. Under no circumstances should you attempt to hide assets or mislead the court with regard to your complete financial picture.

    The alternative could lead to disastrous consequences up to and including prosecution. It’s never worth it. Disclose it all, let the process work for you.

During financial hardships, according to a specialist from Sarkisian, Sarkisian & Associates PC, bankruptcy is frequently a necessary consideration.

Bankruptcy is difficult enough without making things harder. Listen to your attorney and your accountant. Follow the rules and come out of the process stronger.

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