Facing a financial emergency is not an easy matter to deal with. Sometimes things can come to such a point that you are left with no other option but to file for bankruptcy. More often than not, people tend to consider bankruptcy as a scary option. This happens because they are not clear about the whole idea of filing for bankruptcy and how to go about it. If you are considering filing for bankruptcy, you have to keep in mind that your behavior before the filing procedure is as important as your behavior during the bankruptcy process. Here are a few dos and don’ts to follow before filing for bankruptcy:
Do speak to an experienced bankruptcy lawyer
The first thing that you need to do is consult an experienced bankruptcy lawyer. Your lawyer will be the best person to provide you the information you need for making an informed decision. In some cases, bankruptcy may not be the only solution available to you. Even if the lawyer says that it is the final option open to you, you will be able to know how to go about the whole process of filing for bankruptcy. Having an open discussion with your lawyer will enable you to get an idea of the bankruptcy solutions you may opt for and how it will impact your life and financial status.
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Don’t transfer assets or money to family members or friends
Many people take to repaying loans taken from family members or friends by transferring assets or money to them just before filing for bankruptcy. This can be a big mistake to commit. Some people also adopt such measures to safeguard their assets during bankruptcy. What they do not understand is that such actions may be regarded as fraudulent activities on their part. This can create complications in their bankruptcy case and land them in further trouble. So, steer clear of commuting this mistake.
Do disclose all your income, assets, and expenses
If you are to file for bankruptcy, you have to disclose all your income, assets, and expenses in the bankruptcy application. If you hide information regarding these financial aspects of your life, the bankruptcy body dealing with your case won’t be able to treat your creditors in a fair manner. The bankruptcy court is not responsible for ensuring that you make full disclosure about these aspects. It is your responsibility to do so in order to make sure that the bankruptcy court can function properly and you attain a discharge of your debts in a hassle-free manner.
Don’t take on any new debt
Taking on new debt just before filing for bankruptcy is a big no-no. If you take any kind of new debt, you leave behind circumstantial evidence that your intention of paying back the debt does not exist. This is because when you already know that you are in big financial trouble and are planning to file for bankruptcy, you can’t repay any new debt. So, why get into such debts in the first place? In other words, you have to avoid taking any kind of credit, including using your credit card as well. This is an essential point that you have to follow with due diligence.
Do make sure that your tax returns are clear
The guidelines for bankruptcy require you to make sure that your tax returns are all filed. This may include not just the tax returns for the last financial year, but the current year as well. If you fail in this obligation, your bankruptcy case may be dismissed. Many petitioners of bankruptcy ignore this critical point. As such, they fail to get the relief they expect to receive through bankruptcy. If you do not want your case to be dismissed due to this point, file your tax returns and keep all the papers in an organized manner.
Don’t drain your retirement fund
You will be wondering Why Do People File for Chapter 7 Bankruptcy? In many cases, petitioners filing for bankruptcy are able to protect their retirement funds. As such, it can be a major financial error on your part to drain out your retirement fund to repay your loans before filing for bankruptcy. For the same reason, you must not use your home equity to pay off your debts. Once you have used up your retirement fund or home equity to repay debts, you may not be able to build them up soon. This can leave your financial future in a lurch. Talking to a knowledgeable lawyer will help you to adopt the right course of action in such times.
