If it feels like you’re drowning in debt, declaring bankruptcy could provide a much-needed fresh start, as long as you don’t make any mistakes during the proceedings. Unfortunately, since the process of discharging debt can be complicated, it’s not uncommon for petitioners to make one or more missteps along the way. Here are a few of the most common mistakes made.
3 Mistakes to Avoid When Filing for Bankruptcy
1. Falsifying Financial Information
Underestimating your assets to pass the Chapter 7 means test or overestimating them so the court will approve your repayment plan for Chapter 13 bankruptcy is a serious offense. If you’re lucky, the case will merely be dismissed. If the court deems the situation serious enough, though, you could end up facing severe penalties, including major fines and even prison time.
2. Using Credit Cards
As soon as you decide to pursue bankruptcy, stop using any of your credit cards. If you rack up more than $500 in luxury goods on a single card within three months of filing, it will not be dischargeable. Likewise, cash advances of more than $750 from all creditors combined will not be dischargeable if you take them out within 70 days of filing.
3. Liquidating Retirement Accounts
It’s rarely a good idea to cash out retirement savings to pay back creditors. Such funds are typically exempt from bankruptcy proceedings, and if you withdraw them now, you could end up in even more financial trouble once you finally leave the workforce. You will also incur various tax obligations by liquidating retirement accounts, and such debts are not dischargeable.
For help navigating bankruptcy proceedings, turn to The Gil Law Firm. Located in Dothan, AL, and representing clients throughout Alabama, Florida, and Georgia, this firm is led by a seasoned attorney who has nearly two decades of experience practicing law. Before enrolling in law school, Rafael Gil III was in the banking field, which means he is equipped to handle even the most complicated bankruptcy filings. To learn more about his qualifications and those of the rest of his team, visit his website, or call (334) 673-0100 to schedule a consultation.