8 Mistakes of Bankruptcy

Written by Jessica Alba

8-mistakes-bankruptcy You have a major illness or injury in the family, you lost your job or had your hours cut back, you have two much rotating debt, and now you are at the end of your rope. You have struggled for months, if not years, to overcome financial hardships. But, it seems like no matter what you do, it only gets worse. Now, it seems to be spiraling out of control. If any of these scenarios sound like it could describe you and your financial circumstances in the near future, you definitely need to know the 10 mistakes of personal bankruptcy that can get you in a lot of trouble.

Although it might seem like it helps in the short-term, in the end it can only make your financial troubles more complicated and possibly even criminal.

So, do not try to fix your financial problems all by yourself. You are going to need professional help to circumvent all of the bankruptcy laws that could adversely affect your future, if you make the wrong move.

For example:

1. Do not Borrow

Contrary to what you might hear on the news, you can never borrow your way out of debt. Think about it. If you borrow money, you are only going to owe more money than you already do; and, you are already feeling swallowed up by debt. Some people make the mistake of borrowing from friends and relatives. In most cases, it only delays the inevitable. Then, you will never be able to pay back the money you owe to those you love.

It can also cause legal troubles for those you love, when you do file bankruptcy. If you owe a bunch of creditors, and you pay back the money you owe to friends and family, they can sue your loved ones for the money, to help resolve some of the debt to other creditors. You cannot pay one creditor and ignore the others, when you are about to claim bankruptcy.

2. Do not get a Home Equity Loan

Never borrow against your home to get out of debt. Again, you cannot borrow your way out of debt, even if you try to eat macaroni and cheese for ever meal, in the next 7 years. By doing so, you are only putting the roof over your head in jeopardy. Before you get to that point, you will want to talk to a bankruptcy lawyer. Oftentimes, you can still keep your home after filing for bankruptcy. Do not wait until you put everything at risk, including your family.

3. Leave your Retirement alone

Do NOT touch your retirement. Even filing for bankruptcy, there are some things the court will not include in your assets. If they will leave your retirement out of the equation, so should you. The whole purpose of filing for bankruptcy is to give you a fresh start, not to leave you destitute in your old age. Besides, even if you do take some/all of it out, you will probably pay substantial penalties, and it will only delay the eventual need for bankruptcy. Then, you will only be worse off than you are right now. It probably took you years to get into this kind of financial trouble, and there are no quick fixes.

4. Forget a Creditor

Do not try to pay off one creditor at the expense of another. The court will not look kindly on this action. If you have money to resolve debt, and you file for bankruptcy, the amount should be spread evenly among the creditors, so each at least gets a little money. Remember, you creditors have businesses too. They also have bills to pay and families to feed. You need to exercise fair business practices, even if you have to file for bankruptcy.

5. Conceal Assets

Never try to conceal assets, in order to keep them out of the bankruptcy consideration. The bankruptcy trustee is not a stupid person. You will be found out, and it will only cause you additional legal troubles and cause the court to look less favorably on your plight, as they scrutinize your assets and liabilities even more closely. You are much more likely to have your petition denied.

6. Transfer Assets

Even if you did not do it for the purposes of concealing your assets, do not transfer any of them to friends or family members within a year prior to filing for bankruptcy. If you do, the court can demand the assets back to consider in the bankruptcy. It will not save the asset for you, after you file. Plus, it will only cause legal problems for the person who now has the property.

7. Continue making Payments

If you are about to file bankruptcy do not continue to make payments to your creditors. Especially when you can only afford to make partial ones, it is just throwing good money after bad. Now is the time to batten down the hatches and concentrate on providing the basic necessities like food and shelter.

8. File at the Wrong Time

If you are considering bankruptcy, you definitely need the services of a bankruptcy lawyer. You do not want to file too early, if there is something else you can do to relieve your debt. By the same token, you do not want to file too late. Many people wait until the stress has torn their family apart, they have lost their home to foreclosure, and someone has repossessed the family car. You need to know the right time, so you can protect your family and the basic necessities for getting a fresh financial start.