We live in tough economic times for the average family. One the one hand productivity has continued to climb and the world is producing more and more stuff. But on the other hand, wages are flat, and millions of people are falling behind on repayments.
For some people, repayments just keep mounting up. No matter what they try, their debt soon becomes overwhelming, and they consider going into default. Bankruptcy is just something that happens for a lot of people. And often, it’s the only way out of a downward spiral of debt.
But bankruptcy is by no means a straightforward process. There are plenty of hurdles you have to overcome along the way. And many people don’t make it over those hurdles without making mistakes. Often these mistakes are costly to your happiness and your freedom. The following is what not to do if you’re filing for bankruptcy.
Don’t Wallow In Misery
When people are in debt, they tend to think that it’s the end of the world. They feel a mixture of shame and guilt, and they begin to question their own worth. But at the end of the day, money is just money. There are more important things in your life, like the quality of your relationships.
The problem with depression, however, is that it can be disarming. Depression makes people go into themselves when that is the precise opposite of what they should be doing if they want to get out of debt.
The way to approach bankruptcy is this. Don’t put your head in the sand and hope that it all goes away. It won’t – and you’ll just end up making things worse. Rather, steel yourself to face it head on. The sooner you deal with it, the faster it will go away.
Don’t Wait To File
One of the most common mistakes people make when it comes to bankruptcy is waiting. Many people decide that to avoid bankruptcy, they’re first going to sell all their assets. But this often is not the best strategy. Once you’re down to your last dollar in your bank account, you’re fast running out of options.
The best solution is to give yourself time, so that you can discuss your situation with a bankruptcy attorney. Consulting lawyers in advance gives you important time to prepare your bankruptcy petition. Waiting until the last minute means that you will rush your petition, and could make costly mistakes.
Don’t Run Up More Debt Before You File
Once you know that your debt is going to be eliminated, it’s tempting to use whatever credit you can. A lot of people run up even more debt on their credit cards before filing because they don’t think they’ve got anything to lose.
The fact is that they have. If your creditors believe you deliberately ran up debts before filing, you could still be liable to pay them. That’s the case even after bankruptcy.
Don’t Continue Gambling
Many people filing for bankruptcy are gamblers. Unfortunately, gambling will not help your bankruptcy application even if it’s your own money. Stop gambling before you file to avoid unnecessary complications to your application.
Don’t Transfer Your Assets To Others
One of the biggest mistakes that people make before bankruptcy is trying to get rid of their assets. It’s actually illegal to transfer your assets to family members or friends before bankruptcy. And for good reason. Obviously, creditors are going to want to get their hands on any wealth that you have in order to make good on their lost money.
It’s always best to go down the legal route to protect your assets. A great attorney should be able to protect your assets, should the case get to that stage. Just because you are looking to protect an asset, doesn’t mean that you can give it away freely. Go through the process and avoid doing anything criminal.
Don’t Forget Your Accounts Receivable
It’s worth mentioning that your assets aren’t just the things that you already have. They’re also all the things that you’re owed by other people. If you’ve provided somebody with a service but have not yet been paid, this still counts as an asset. When it comes to filing your bankruptcy, all the money you’re owed should also be included in any statement of your assets.
Don’t Pay Back Your Friends And Family
You might prefer to pay back the people you know before your creditors, but the law certainly doesn’t. Whether your creditor is your dad or a major bank, they are all equal creditors in the eyes on the law.
Paying back family before filing your application is not a good idea. Doing so reduces your chances of retaining any assets you have.
Don’t Tell Lies
Most people who file for bankruptcy protection do actually qualify. And even those who don’t often have other routes available to them.
The problem comes when a person who doesn’t qualify goes ahead and files anyway. If they have a large debt, but also have significant assets, they’re likely to be rejected. But if they lie about those assets they risk not being able to file in the future. This is a big problem. If their debts end up getting out of control, they can’t do anything to protect themselves legally from creditors. And as a result, they face years or misery trying to pay back bad debts.
Don’t Leave Out Household Income
When it comes to bankruptcy, it’s not just about you. It’s also about all of the people that the court believes could reasonably support you. And that includes other people living in your household. Perhaps your income is $2,000 a month, and you can’t afford to pay back your creditors. But perhaps you have a spouse living with you who also earns $2,000 a month. On top of that, perhaps you have a child who earns another $2,000 a month.
Those facts change a lot in the eyes of the court. A $6,000 a month household income is a dramatically different situation to a $2,000 a month family income. In bankruptcy cases, you must include all household income.