Filing for bankruptcy is a big step, one that you have probably considered extensively before taking this step. What many consumers do not realize is that a bankruptcy filing can be complex and there are some things you should avoid before you file a bankruptcy petition. If you take certain steps, even months before you file for bankruptcy, you could create complications in your case or even cause your bankruptcy discharge to be denied. Certain activities may be viewed as fraudulent, and in some cases could lead to criminal charges in addition to causing your bankruptcy case to be dismissed.
Mistake #1: Incurring New Debt Right Before Filing For Bankruptcy
Deciding to file for bankruptcy can take time. Once you decide to file this type of case you may be tempted to incur new debt. A common thought is that since your debts will be eliminated why not get that luxury item you want and then file the bankruptcy, but this is a big mistake. Changes in the bankruptcy law were put in place to prevent this type of behavior. The bankruptcy judge will look closely at debts that were incurred within the last 6 months before you filed for bankruptcy, and in many cases may refuse a discharge for those debts if the items or services paid for are not necessities.
Mistake #2: Selling Or Giving Away Property Or Money
Many consumers consider giving away valued possessions and expensive items before filing for bankruptcy. Usually these items are given to close friends and family members, with the intention of protecting the property from bankruptcy and getting it back later on. Another common scam is to sell the item for far less than the value, so it can be purchased back later on and eliminates any oversight on the property during bankruptcy. If these schemes are discovered by the bankruptcy court your discharge will be denied and you can face criminal charges for fraud.
Mistake #3: Withdrawing Retirement Funds
Many consumers withdraw funds from retirement accounts in an effort to try and get current on debts but this is a big mistake that should be avoided. Your retirement funds will be needed when you retire later in life, and early withdrawals carry very large tax penalties as well as other additional costs. Most retirement accounts are protected during bankruptcy so your creditors can not normally touch these funds to pay off your debts.
Mistake #4: Taking Out A Second Mortgage
Home equity is usually protected during the bankruptcy process, and mortgage debt is not allowed to be discharged under the bankruptcy laws. Taking out a second mortgage will not help you resolve debts in most cases and will actually place you in an even bigger financial bind. A second mortgage means additional debt and the goal is to eliminate your debt not create more. Bankruptcy can discharge most debt types, including medical bills and credit card debt, but if you take out a second mortgage this debt will need to be repaid and you can not get a fresh financial start.
Mistake #5: Paying Back Friends And Family Members
For most people it is important to make sure that friends and family members are repaid if they loaned you money. This repayment should not take place before you file for bankruptcy though, and this step is important. During a bankruptcy case you will need to list all of your creditors, and this includes anyone you owe money to including family members and friends. If you pay family or friends then you could be accused of giving these creditors preference, and paying them in order to avoid listing them in bankruptcy.
Bankruptcy can help many consumers, but this is not the right answer in every case. The bankruptcy attorneys at Richard West Law can help provide a free debt consolidation consultation to help you find the right answer for your unique debt problems and circumstances. Visit https://www.debtfreeohio.com or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.