The process of filing for bankruptcy can be incredibly complicated, which is why many people hire a bankruptcy attorney to avoid making mistakes. However, there are some common mistakes that people make that end up hurting them later on. Here are some of those mistakes that you'll want to avoid.
Cashing In Retirement Accounts to Pay for Debts
People tend to do whatever they can in order to avoid filing for bankruptcy, which sometimes includes cashing out retirement accounts to get some cash to pay those debts. Unfortunately, this is a huge mistake that people make when they eventually file for bankruptcy. That is because your retirement accounts will be protected during the bankruptcy process, and creditors will not be able to access them when assets and bank accounts are being liquidated.
Settling Debts Close to the Bankruptcy Filing
You may be tempted to settle as many debts as you can before you file for bankruptcy, but this is another mistake that will cause problems. That is because these debt payments can be considered a preferential payment, and eventually clawed back from the creditor. Even if you negotiate a smaller amount of debt to pay it off in full, the payment may be illegal due to how recently it was made to your bankruptcy filing.
Making Cash Advances on Credit Cards
One of the nice things about bankruptcy is that your unsecured credit card debts can be discharged. However, just because it is a debt on your credit card does not mean that it can be discharged. Your credit card history will be looked at closely, and any cash advances that you took close to the bankruptcy filing may not qualify. If you think that these cash advances will be lumped in with all your credit card debt, then you will be in for a huge surprise.
Transferring Assets to Other People
Another way that people think they can outsmart the bankruptcy process is to simply transfer large assets out of your name, typically to a friend or family member. There will always be a paper trail when transferring vehicles, homes, boats, and expensive assets that typically require documentation. This will be discovered, and the asset will be considered for potential liquidation in your bankruptcy filing.
Thankfully, many of these mistakes can be avoided by simply using a lawyer to guide you through the process. Meet with a local bankruptcy lawyer in your area for a consultation to hear how they can help.
