From medical debts to housing market crashes and pandemics tanking the economy, there are plenty of reasons bankruptcy may become necessary. The end goal of going bankrupt is to get some funds to your creditors while you get back on your feet and start over. While this process can wipe the slate clean or significantly reduce your debt, you could end up still in the hole financially if you don’t plan carefully.
Don’t Make These Common Errors When Filing for Bankruptcy
Both Chapter 7 and Chapter 13 bankruptcy are complicated procedures, and they come with legal dangers you might not even be aware of ahead of time. Without the help of an experienced bankruptcy attorney, it is all too easy to cause yourself headaches by:
- Filing at the wrong time. In many cases, filing quickly means getting creditors off your back and stopping wage garnishments. There are times it's better to file later, however, such as if you need to wait to take the means test for evaluating your finances and determining which type of bankruptcy is available.
- Making large purchases. Buying furniture or a new car while expecting the debt to be discharged is an all-around bad idea. The court looks at all of your financial activity in the months before bankruptcy and may decide not to eliminate that debt.
- Paying a large amount to a single creditor. That big payment could be entirely undone by the court to pay other bills, which simply prolongs the process and leaves you in financial limbo longer than necessary. Make small payments to all of your creditors instead.
- Pulling out retirement funds. Many retirement benefits are exempt during bankruptcy. Don’t put your financial future in jeopardy to pay debts that are going to be wiped clean anyway.
- Transferring property to family. This tactic does not actually protect your assets during bankruptcy. In fact, it can be construed as fraud that causes legal trouble you don’t want. There are numerous exemptions available you should discuss with an attorney to keep needed assets like a vehicle and in some cases even your home.
- Using credit. Stop using any credit cards, even for cash advances, and don’t take out any new loans. The creditor can claim you had no intention to pay those debts and you could end up still having to pay them back.
Get Help From a Seasoned New York Bankruptcy Attorney
The number one mistake is not talking with an experienced attorney who can advise you on the ins and outs of the entire process of either Chapter 7 or Chapter 13. Call or message us today to schedule an appointment and find out how we can help you navigate a New York bankruptcy.