When you under severe financial stress, you may not be left with any other option but to file for bankruptcy. However, since there are laws in place regulating the procedure, eligibility, and intervals at which you can file for bankruptcy, it is important to consider if it is the right option and the various things you should avoid to qualify to get a bankruptcy discharge.
Make Sure That Filing for Bankruptcy Is the Only Solution
There are limitations to filing for bankruptcy that you need to keep in mind. For example, you can file for a Chapter 7 bankruptcy once every eight years and a Chapter 13 discharge every six years. If you think you are likely to face even more serious financial issues because you are suffering from an illness necessitating expensive treatment, or eviction, unemployment, foreclosure, etc., it might be wiser to wait until you are eligible to get a bankruptcy discharge.
Don’t Use Your Retirement Account to Pay Your Debts
The laws governing bankruptcy are designed to protect your retirement funds, which is the reason why you should never make the mistake of paying off your creditors by tapping into your retirement accounts. It is invariably far better to file for bankruptcy and get your debts discharged; however, you should consult a competent bankruptcy lawyer for the best advice on debt repayment. According to nytimes, your lawyer is the best person to advise you on whether to file and when to file for bankruptcy.
Don’t Take on Fresh Debt
If you have taken on additional debt in the three months leading to the bankruptcy filing, creditors might object because you committed fraud as you knew that you were not capable of it paying back. Of course, this does not apply to your taking on debt to pay for life’s necessities like food, clothing, utilities, etc. Generally, acts like taking out a cash advance or using your credit card to buy a non-essential item are held to be presumptive fraud, and it might be responsible for the bankruptcy filing getting rejected.
Don’t Sell or Transfer Assets
It can be tempting not to declare your assets, transfer, or sell them before filing for bankruptcy. However, if it is discovered not only will it lead to rejection of your discharge but also you may be subject to criminal penalties. Of course, you will not be penalized if you sell an asset to pay for your living expenses but you should be able to justify your actions as well as account for the application of the sales proceeds with adequate supporting documentation.
Conclusion The bankruptcy filing procedure relies on the applicant being completely truthful regarding his financial status so it is vital not to provide information on your income, expenses, assets, debt, and financial history that is incomplete, inaccurate, or false. Not following the procedure can get your case dismissed while leaving a creditor out may not get the debt included for discharge. Leaving out assets may lead to its seizure by the trustee while misrepresentation or intention to defraud can involve steep criminal penalties, including up to $250,000 in fines, 20 years jail time, or both.