Mistakes to avoid before filing bankruptcy

Bankruptcy laws are typically complex in nature and a number of filers commit blunders before they even file their bankruptcy petition in court. The truth is that some specific blunders will adversely affect your bankruptcy petition and see it thrown out. That is why you should consult a bankruptcy attorney when you plan to file for insolvency to avoid making these avoidable mistakes. In this regard, here are a number of common blunders to avoid.

Making credit purchases 

Some filers may choose to make credit purchases a few weeks prior to filing bankruptcy. Carrying out these transactions is likely to elicit a negative implication concerning whether the filer is actually filing insolvency in good faith or not. If a courthouse deems that a bankruptcy petition was made in bad faith, the petition can be even declared fraudulent. In particular instances, a bankruptcy petition can be declined, for example when the filer has a recent payday loan. Any recent debt gives creditors as well as the court sufficient grounds to decline your bankruptcy petition. 

Property transfer

In a mischievous attempt to protect specific assets, a filer can transfer huge sums of cash or other property like home into the name of their trusted friend or a family member. This means that that they are giving up legal ownership of their assets so that their bankruptcy petition cannot raise eyebrows. However, this strategy may lead to a bankruptcy fraud investigation. Moreover, choosing to transfer assets out of your legal possession will likely have you lose any form of bankruptcy protection you might have retained. As your attorney will tell you, you can file for insolvency irrespective of your possessions and you can even retain ownership but this may not occur if you no longer lawfully own the assets.

Failure to file income tax returns 

Note that your tax returns are an important source of information when completing the needed bankruptcy filings with the courthouse. Through your income tax returns, the court will learn about your current earnings and property ownership which your bankruptcy attorney can fight to protect. If you don't file income tax returns, you are likely to see your bankruptcy case dismissed. 

Providing false information

Typically, the debtor is expected to file crucial financial details and filings with the courthouse. These paperwork are filed as sworn testimony or evidence with the risk of perjury involved. If a filer cunningly misrepresents the submissions, they may face criminal prosecution if found out. 

Share