Most people are aware that the bankruptcy process can be tricky to navigate, which is why hiring a bankruptcy attorney can greatly influence the success of a case. In general, there are a three top mistakes people make before filing for bankruptcy than can significantly impact the outcome of their case.
Accumulating More Debt
One of the most commonly ignored rules to filing for bankruptcy is how debts were acquired prior to filing. This refers specifically to the charging of more debt within the months prior to bankruptcy. Bankruptcy laws state that a debts exceeding $550 on a credit card or cash advances of $825 or more acquired within 90 days of filing will not be eligible for discharge.
In efforts to avoid certain assets from being at risk in bankruptcy, many people may attempt to sell or transfer assets to others before filing. In many cases, the bankruptcy court views this action as fraudulent and may even dismiss the case as a result. Bankruptcy laws prohibit giving or transferring of assets to other prior to bankruptcy, especially if this action is withheld from the court. However, the laws do allow for a debtor to sell an asset prior to bankruptcy, but the asset (a) must be sold for fair market value and (b) must be claimed in the bankruptcy filing.
While it may seem like a good idea to secure a second job or pay off some debts before filing for bankruptcy, these actions could make a person ineligible for bankruptcy. The reason is that a debtor’s income is an important factor in determining eligibility for bankruptcy. If the court deems the debtor’s income as sufficient, they may not be able to seek the protection and benefits of bankruptcy. Repaying debts can also impede a person’s eligibility for bankruptcy.