When you are in the midst of financial turmoil, it isn't always easy to see the light. In addition to dealing with personal guilt, you might also have a hard time answering calls from bill collectors and family members. In an effort to make things right, you might be thinking about declaring bankruptcy. Unfortunately, a bad decision or two could alter your ability to discharge your debt. Here are two mistakes that could destroy your case, and how you can streamline the process:
1: Skipping the Legal Counsel
In 2014, over one million people declared bankruptcy. If you have a brother, friend, co-worker, or social media acquaintance that has gone through the process, you might figure that you are well versed enough to handle your own filing—without the help of an attorney. Unfortunately, unless you read legal financial documents for fun during your free time, figuring out bankruptcy proceedings might be more difficult than you think. Here are a few reasons you should always work with an attorney to file bankruptcy:
- Filing the Wrong Chapter: A bankruptcy is a bankruptcy, right? Wrong. Although they might all seem the same, different types of bankruptcy are suited for different situations. For example, if you file a Chapter 13 bankruptcy instead of the Chapter 7 version you need, you might end up being asked to pay back debt in a restructured plan instead of having your bills wiped away. Fortunately, a lawyer can evaluate your finances and decide which filing is best for you.
- Exemptions: Depending on the type of bankruptcy you file, you might be required to sell some of your assets to pay past-due balances. However, some states, like California, have exemptions to protect possessions like your car or household furnishings. Working with a professional attorney who can interpret state law and new legislation will help you to protect the things that are rightfully yours.
- Legal Progression: One huge benefit to working with a bankruptcy lawyer is that they understand how the legal process unfolds. Instead of filling out forms haphazardly and guessing on due dates, you can have an expert by your side to help you to navigate the legalities.
Although it might seem expensive and overwhelming to hire a professional, some lawyers charge flat fees for bankruptcy filings. For example, if you file a simple Chapter 7 bankruptcy filing, attorney fees tend to range between $500 and $3,500.
2: Misrepresenting Debts or Assets
After spending years accumulating assets, it can be a little unnerving to think about selling those items to satisfy debts—especially if you don't feel like you should pay your creditors. Unfortunately, although it might be tempting to misrepresent your financial situation, doing so could cause your case to be dismissed. Here are a few things you should never do when you are going through a bankruptcy:
- "Giving" Items Away: If you want to keep that boat or ATV, you might be tempted to "give" the vehicle to a friend or family member until your bankruptcy trustee stops looking into your assets.
- Disguising Income: Since your income will come into play when your attorney works out your debt repayment plan, some people are tempted to ask their employers to hold bonuses or alter income reporting.
Believe it or not, making these types of decisions could cause more trouble than just delaying your bankruptcy. In fact, if you are caught trying to conceal assets, you could be subjected to criminal charges that could carry a fine of up to $250,000 or five years in prison. To fend off trouble, always be as honest and transparent as possible with your attorney and bankruptcy trustee.
By working with a lawyer and following the rules, you might be able to wipe the financial slate clean, so that you can enjoy your life again. Click here to read more.