When you need to file for bankruptcy to overcome mounting debt, following your bankruptcy attorney’s advice and avoiding common mistakes is essential. Failure to do this can result in significant penalties and could even get your bankruptcy case dismissed.

Check out some of the most significant and common mistakes clients make before, during, and after filing for bankruptcy.

1. Filing For the Wrong Type of Bankruptcy

One of the most significant – and first – decisions you need to make is what type of bankruptcy you want to file for, Chapter 7 or Chapter 13. With Chapter 7, some of your assets can be liquidated to pay off some of your debts. In Chapter 13, you must create a repayment plan and have it approved by the court. During this process, you will repay your debts throughout 3 to 5 years.

It’s essential to file for the correct type of bankruptcy. Selecting the wrong kind can cause your bankruptcy to be dismissed or could put you in a situation where you cannot afford to make the required payments.

2. Racking Up Credit Card Debt Right Before Filing for Bankruptcy

Before filing for bankruptcy, you might be tempted to go on a shopping spree with your credit card, knowing that the debt will be discharged during your bankruptcy. This is a significant error and can get you into major trouble. Before filing for bankruptcy, you cannot make large purchases on your credit card for 90 days. If you do this, your creditors can file lawsuits against you, as you made the purchase knowing you cannot afford to pay the balance. You can also face fraud charges and put your bankruptcy petition at risk.

3. Give Your Property to Friends or Family

If you are filing for Chapter 7 bankruptcy, you may have to liquidate your non-exempt assets to pay back some of your debt. To avoid this, you may be tempted to put your assets or property in another person’s name to prevent having them sold off. However, this is a mistake! The court will look back at your property and any asset transfers. If you gave someone your assets and did not receive anything in return, or if it looks suspicious, the court will investigate the transaction. This can be considered fraud and can put your bankruptcy at risk.

4. Create a Repayment Plan You Can’t Afford

With a Chapter 13 bankruptcy, you need to create a repayment plan. This needs to be submitted to the court and approved. Under this plan, you will submit a monthly payment for 3 to 5 years to be distributed to your creditors. After the repayment plan, your bankruptcy will be finalized, and any remaining debt will be discharged.

When you create a plan, you must get approval from the court to ensure your debts are handled fairly. You also must ensure you can afford the monthly payments. Failing to make a payment on time can result in your bankruptcy being dismissed.

5. Prioritizing Debts to Relatives and Friends

If you received loans from friends, family, or other loved ones, it can be tempting to pay off your debts to them first when you file for bankruptcy. However, you need to treat them the same as all other creditors. The court will view it as you are favoring your loved ones by paying them back before handling your other bills.

Contact A Bankruptcy Attorney to Avoid Common Mistakes

When filing for Chapter 7 or Chapter 13 bankruptcy, you need to avoid common mistakes to prevent putting your bankruptcy at risk. You need to hire an experienced attorney to help you through bankruptcy. Our attorneys can help you determine what steps you need to take. We will also clear up any confusion after your bankruptcy is final! Don’t let debt ruin your life—call (405) 529-9377 or use our convenient online form for a free case review.