There are many frustrating things in our lives and preparing to file a Chapter 7 Bankruptcy petition is one of them. At this moment, you know that you have messed up financially in a big way. You know that you could do better and you are being regretful of mistakes and negligence that make your financial situation worse. Unfortunately, you can still do mistakes that make Chapter 7 Bankruptcy more difficult to handle. In fact, if the situation is serious enough, these mistakes may cause the dismissal of the case. If you want to greatly improve your chance of success, here are a few mistakes that you should avoid:
- Paying debts to friends and family: It may seem like a good thing to pay debt to your friends and family. However, when you are filing for Chapter 7 Bankruptcy, this can be problematic. The Bankruptcy Code states that you need to disclose any payment above $600 to friends and family within the past year. Depending on your financial situation, the trustee could even ask you to pay the trustee the same amount that you gave to friends and family. Imagine that your friends and family gets a letter from the Bankruptcy Trustee, demanding that they repay the money. On top of your current financial mess, you can suffer from huge embarrassment as well. If you are considering filing Chapter 7 Bankruptcy in the near future, it is best not to repay your debt to friend and family, especially if it’s more than $600. If you really need to repay the debt due to some other considerations, you should talk with the attorney about it and find less risky ways.
- Using credit cards and taking cash advances: These can be a huge red flag for everyone who oversees your Chapter 7 Bankruptcy filing. If you use credit cards or take cash advances quite close to the date when you file for bankruptcy, then it can cause some problems. If you decide to max out your credit cards, then Trustee and creditors can consider it as fraudulent. They may think that you plan to take advantage of the Chapter 7 Bankruptcy benefits. This mistake can cause the dismissal of your Chapter 7 Bankruptcy filing. In fact, some people could face severe consequences, including criminal persecution. If you plan to file soon, stay away from your credit card and don’t use it completely.
- Hiding, giving away and transferring assets: When filing Chapter 7 Bankruptcy, you should declare all of your assets. Any attempt to transfer the ownership of an asset and hide it, can cause severe consequences. Non-disclosure of your asset is a big no-no and your failure to do that can affect your case negatively. Trustee will scrutinize your financial assets and past history of ownership transfers. If you have transferred assets in the past, although you didn’t have bad intention, you should be upfront about it. Explain that you didn’t have the plan to file bankruptcy at that time.