Filing for Chapter 7 bankruptcy is a significant financial decision that can have long-lasting effects on your credit and economic future. Before filing for Chapter 7 bankruptcy, there are several things you should avoid doing to ensure the process goes as smoothly as possible and to maximize the benefits of bankruptcy protection. Here are some things you should not do before filing for Chapter 7 bankruptcy:
Don’t incur new debt: Adding more debt shortly before filing for bankruptcy can raise suspicions of fraudulent behavior. Avoid using credit cards or taking out loans once you decide to file for bankruptcy.
Don’t transfer assets: Transferring assets or property to friends or family members before filing for bankruptcy can be seen as an attempt to hide assets from creditors. Such transfers may be considered fraudulent and can complicate your bankruptcy case.
Don’t make large purchases: Significant purchases before filing for bankruptcy, especially if they are non-essential or luxurious items, can raise questions about your financial intentions. Courts may view such purchases as an attempt to run up debts you intend to avoid repaying.
Don’t repay loans to family or friends: Repaying loans to friends or family members before filing for bankruptcy can be considered preferential treatment and may be subject to clawback by the bankruptcy trustee. Treating all creditors equally in the period leading up to bankruptcy is essential.
Don’t hide assets or income: Concealing assets or income from the bankruptcy court is illegal and can result in severe consequences, including criminal charges. Be fully transparent about your financial situation and provide accurate information to the bankruptcy trustee.
Don’t ignore creditor actions: Ignoring collection efforts or legal actions from creditors won’t make them go away and can result in additional fees, penalties, or even lawsuits. Addressing creditor claims and responding to any legal notices you receive is essential.
Don’t neglect your financial responsibilities: While facing financial difficulties, it’s crucial to continue meeting your essential financial obligations, such as paying rent or mortgage payments, utilities, and other essential expenses. Failing to do so can have negative consequences and may impact your bankruptcy case.
Don’t try to do it alone: Filing for bankruptcy is a complex legal process, and making mistakes can have serious consequences. It’s essential to seek advice from a qualified bankruptcy attorney who can help you understand your options, navigate the bankruptcy process, and protect your rights.
By avoiding these common pitfalls, you can help ensure that your Chapter 7 bankruptcy filing proceeds smoothly and that you can obtain the debt relief you need to make a fresh financial start.