Chapter 7 bankruptcy represents an opportunity for people to start over when their finances and debt have become unmanageable. Despite this, AP News reports that fewer than 1% of American households file for bankruptcy each year, likely due to fears surrounding the process.
If you are in need of financial relief, do not be afraid to consider Chapter 7 bankruptcy. However, there are still some key mistakes that you should avoid before and after you file.
Making credit card purchases
After you make the decision to pursue bankruptcy, stop using your credit card. Too often, people try to run up their credit card bills, believing that those debts will disappear. Many of these such debts may not be dischargeable.
Failing to understand property exemptions
With Chapter 7, some property is exempt from the bankruptcy process. The rules regarding exemptions can be complex, particularly with complex assets. Make sure you fully understand these regulations to ensure you comply with the law.
Favoring creditors
Though you may owe money to a relative or friend, you cannot favor that person over your other creditors by repaying personal loans before filing. In some circumstances, the bankruptcy court can recover these payments.
Transferring assets to someone else
You cannot transfer property to a relative or anyone else in order to hide it from the bankruptcy proceedings. Courts can often reclaim assets that you transferred with the intent to deceive.
Bankruptcy represents a fresh start. This process does not have to be scary if you act in good faith and use common sense.