4 Missteps to Steer Clear of Before Filing for Bankruptcy
For those who feel overwhelmed by debt, filing for bankruptcy may be the step necessary to get back to solid ground. Chapter 7 bankruptcy offers a financial reset by discharging eligible debts. Keep in mind that actions taken leading up to filing can impact the outcome of the case tremendously. For this reason, our expert bankruptcy attorneys would like to highlight the four most common missteps, including racking up new debt, transferring assets, draining retirement accounts, and ignoring taxes. Let’s delve into the details and how to avoid taking these missteps for a smooth bankruptcy process.
Luxury Spending Before Bankruptcy Is a Risky Move
Racking up new debt before filing for bankruptcy is one of the most common costly missteps. Imagine Susan, who went on a last-minute shopping spree, splurging on luxury items such as jewelry, high-end furniture, and designer clothes. Her actions backfired because the courts viewed such spending as fraudulent. Those debts were non-dischargeable, and the action jeopardized the whole case. Instead, before filing, Susan should have focused on responsible purchases and stuck to the basics—food, toiletries, medical expenses, and essential items.
Transferring Assets Before Bankruptcy Backfires
Passing assets to others before filing could mean serious repercussions. For example, Bob shifted ownership of his luxury RV to his son, Dillon. They hope that the transfer protects the RV from creditors, and while this may seem like a clever move, the courts view any attempts to hide assets as fraudulent. The best case scenario is that Bob’s case is dismissed, and the worst case scenario is that he faces criminal charges. Instead, Bob should have been transparent about his assets and sought guidance from a qualified bankruptcy attorney to navigate the process legally and responsibly.
Draining Retirement Accounts Before Bankruptcy Is a Costly Mistake
Draining retirement accounts before bankruptcy can be another costly mistake. Take Amy, for instance. Feeling overwhelmed by her debts, she emptied her 401(k) and IRA accounts, thinking it was the responsible way to pay down her creditors and avoid filing for bankruptcy. While her intentions were good, she needed to realize those retirement funds are often protected in bankruptcy. Amy jeopardized her future financial security by using them up for little immediate gain. Instead, Amy should have kept the accounts intact and consulted her bankruptcy lawyer for guidance.
Ignoring Tax Returns Before Bankruptcy Complicates Things
Ignoring tax returns before filing for bankruptcy adds an extra layer of complexity to bankruptcy. Take Robert, for example, who felt overwhelmed by his financial troubles. He mistakenly thought that avoiding filing taxes would buy him more time. In reality, all this did was delay and overcomplicate the bankruptcy process because trustees need tax documents to assess the financial situation accurately. Instead, Robert should have teamed up with a trusted bankruptcy lawyer to make certain all tax returns were up to date before filing.
Count on Expert Help for a Smoother Bankruptcy
Avoiding these common missteps when filing for bankruptcy makes a big difference in the outcome. An experienced bankruptcy attorney by your side can prevent costly mistakes and guide you through each step. For many, filing for bankruptcy feels overwhelming. For this reason, The Law Offices of Ronald I. Chorches gives you expert legal support to navigate bankruptcy confidently. Contact us today for help.
