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What not to do when filing for bankruptcy

If you have unmanageable debt, bankruptcy can give you a chance to refocus your finances. By filing for bankruptcy, your debts are forgiven.

Now, a few cons. Although the purpose of bankruptcy is to alleviate some financial stress, the process costs money. Ironically, filing for bankruptcy can be expensive.

While filing for bankruptcy will rarely result in a person losing everything they own, it is possible to lose some of your personal belongings through the process of liquidation—the court-mandated selling of some items to help pay off debts in chapter 7 bankruptcy.

One final con is the damage bankruptcy can inflict on your credit history. A hit to your credit history can make it difficult to get loans, credit cards and even a place to live.

Filing for bankruptcy: What not to do

While it’s important to understand the pros and cons of filing for bankruptcy, it’s perhaps equally as important to understand what not to do during the filing process. Here, a brief rundown:

  • Not reporting all assets: Failure to report all assets can have serious consequences. In addition to dismissing your petition for bankruptcy, courts could lay on some hefty fines and even jail time.
  • Giving away valuables: If you’re caught giving valuable possessions to friends or family members to save them from liquidation, there can be consequences. Basically, if you own it, list it as an asset.
  • Going on a spending spree: This is a common red flag. If you run up your credit card debt shortly before filing for bankruptcy, your petition can be challenged and dismissed. It’s simple: if you’re filing for bankruptcy, leave your credit cards alone.
  • Don’t rush: Bankruptcy is a serious, life-changing decision. It’s also important to know that the number of Chapter 7 debt discharges you can receive is limited—once every eight years or six years following a Chapter 13 filing.

Bankruptcy can be a positive, rewarding experience. But it can also be incredibly complicated. If you or a loved one is considering bankruptcy, it might be a good idea to consult the help of an experienced bankruptcy attorney. Your financial future is at stake.

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