Realizing that you can’t pay your debts is a disheartening experience. For some people, the answer to this is to file for bankruptcy.
Filing for bankruptcy isn’t a last-minute decision. It’s usually one that’s carefully planned. While you’re getting ready to file, be sure to avoid any of these:
Incurring new debt
Taking on additional debt shortly before filing for bankruptcy can be seen as fraudulent by the court, particularly if it appears that you had no intention of repaying the borrowed funds. This may include using credit cards, taking out loans or borrowing money from friends or family.
Transferring or hiding assets
Attempting to transfer or hide assets before filing for bankruptcy can be considered fraudulent and may result in penalties, denial of discharge or even criminal charges. Be transparent about your assets and financial situation when filing for bankruptcy.
Favoring specific creditors
You should avoid paying off select creditors in preference over others before filing for bankruptcy. The bankruptcy trustee can potentially reverse these preferential payments and it may result in complications during your bankruptcy case.
Depleting your retirement accounts
Retirement accounts are generally protected in bankruptcy. Avoid using retirement funds to pay off debts before filing because you may lose those funds and still have to go through bankruptcy.
Failing to file taxes or pay taxes due
Make sure you are up to date with your tax filings and payments. Unpaid taxes can complicate your bankruptcy case and may result in your tax debts not being discharged.
One of the best things you can do is to learn about your rights and responsibilities when you file for bankruptcy. This can help you to determine the best course of action for your circumstances.