Friday, November 18, 2016, AM | Leave Comment
Because laws governing bankruptcy are quite complex, it can be very easy to make mistakes that prevent people from even qualifying for bankruptcy or adversely affect the outcome of their filing.
A brief primer on mistakes to avoid:
Using Credit before Filing
Many people think that since they will be protected with their bankruptcy filing, there is no harm in continuing to use credit card to make purchases or even taking payday advances.
Sometimes, profligate behavior in the months and weeks leading up to the filing date may have a negative implication to the extent that the filing itself may be considered to be deceitful.
In certain cases, when filers have taken payday loans before filing it has not been unusual for the bankruptcy filing to be denied.
Even if the filing is permitted by the court, creditors can always object.
In a bid to safeguard some of their assets, some filers are inclined to transfer their property or financial assets to their spouses, children, or relatives.
However, if the value of transfers is large it can easily result in an investigation of bankruptcy fraud.
It is possible that filers may also lose the protection given by bankruptcy. It should be appreciated that bankruptcy petitions can be made even if filers possess assets and the law may also permit them to retain them.
However, for this to happen, the assets must be legally owned by them.
Selective Payments to Creditors
Some people view debt repayment as a moral obligation and feel compelled to pay back friends and relatives or other selected creditors before filing for bankruptcy.
However, as well-intentioned as it may be, this sort of a tactic can spell doom for the bankruptcy petition.
Even if the bankruptcy goes through, the trustee is often empowered to sue creditors who had been preferentially paid back to recover the funds.
Not Engaging a Bankruptcy Lawyer
Chapter 7 bankruptcy filing is best done by lawyers specializing in this domain due to the various complexities involved.
An experienced law firm in Atlanta will be able to help the filer to complete all the formalities required in terms of information and documents to enable the filing to be successful.
The law firm will also be able to advise the filer of his rights and obligations and how to avoid making mistakes that can prove costly.
Changing Financial Transactions
It is important for the filer to continue to behave as usual with respect to financial transactions in the period leading up to the filing.
Just as he should continue to service his debt obligations as he had done in the past, he should also desist from making fund deposits with money that does not belong to him or using his personal account to carry out business transactions.
Not Filing Tax Returns
The bankruptcy court relies upon the income tax returns of the filer as a vital source of information.
With the help of these returns, the filer is not only able to complete the required filing procedures but also help the court to understand how much he currently earns and what assets he owns, which may be attempted to be protected by the bankruptcy lawyer.
The absence of the income tax returns may result in the bankruptcy petition to be dismissed.
Making a Claim for an Asset
Even if the bankruptcy filer has a legitimate claim for an asset against another person or body, the claim does not belong to the individual but to the estate of bankruptcy after the filing is done.
Receiving Payments Due In The Future
Even though the filer does not have certain funds in his possession but knows that they are due at some point in the future, the funds actually belong to the bankruptcy estate and will be used to pay off creditors.
The nature of funds receivable could be as diverse as a workplace bonus, an inheritance expected, or even a tax refund from a return already filed or to be filed in the future.
Disregarding Creditor Collections
Once a creditor is armed with a judgment, it can move to recover a debt in any way it thinks fit such as garnishing your bank account or wages or getting property foreclosed or repossessed.
However, after a bankruptcy petition an automatic stay comes into play that protects the debtor from being subject to any creditor collection action. This needs to be explained to creditors to prevent them from taking any debt collection action.
Not Providing Accurate Information
It is a necessary condition that when a bankruptcy filing is made, the court is provided with financial information that is correct.
Since all documents are submitted after being sworn as being true, giving incorrect information may invite criminal prosecution.
James Bright is an experienced bankruptcy lawyer who has a very successful track record of assisting clients to file successfully for Chapter 7 bankruptcies. Passionate about bankruptcy law, he blogs prolifically on the subject too.