Planning to File for Bankruptcy? Here’s Everything You Must Avoid

Man showing his empty pocket

Bankruptcy laws are naturally difficult, which is why filers make errors even before they start filing their petition in a courthouse. Committing particular errors, however, could have an opposite impact on bankruptcy. It could even stop some individuals from qualifying for bankruptcy.

Here are some errors you need to avoid, so you won’t suffer the same fate:

Reassigning Property

There are filers who think that they could protect particular assets, like their property or money, by transferring it into someone else’s name. The problem is this action could cause bankruptcy fraud inquiry. Moreover, transferring assets out of your name could lead to losing their protection from bankruptcy that they should have retained. People who file for bankruptcy can still keep their assets, but this won’t happen if they don’t own it.

Selectively Paying Creditors

Osmondlaw.com noted that many people view debt as a moral obligation, which shouldn’t be the case. They always feel that a debt to their employer or relative is more significant, so they would prioritize these instead of filing bankruptcy. What they are unaware of is that selectively paying their creditors can be a disaster. They usually provide the trustee control to sue the person that they paid back to be able to recover the funds for the bankruptcy estate.

Not Filing Tax Returns

Tax returns are important as a source of data to accomplish essential court filings. This helps demonstrate their recent earnings and display ownership of particular assets that a lawyer could try to protect. Without these tax returns, it could lead to a bankruptcy case dismissal.

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Making a Legal Claim

An individual has a genuine claim against an entity or a person. Afterward, their claim turns into the bankruptcy estate’s asset as soon as they filed a bankruptcy petition.

Filing for bankruptcy was one of the most difficult decisions you’ve ever made. Make sure that you don’t screw it up by avoiding the above errors.