If you’re truly looking for a fresh start, don’t lie. Be upfront about your financial situation – assets, debts, loans, wages.
Jacksonville, FL – Filing for bankruptcy is a way for businesses and individuals who are struggling to keep up with their debts to regain financial stability. As a Florida resident, you have an option between multiple types of bankruptcy, depending on the specifics of your situation.
Filing for bankruptcy can be a wise legal action to undertake, but you want to make sure you do it right. Below, we look at the 5 most common mistakes that your lawyers want you to avoid before filing for bankruptcy.
- Don’t use legally protected accounts to pay off debt.
Racking up debt is a nerve-wracking event. Under that immense pressure, a lot of people resort to pulling money out of their retirement or pension accounts to pay off debt.
Don’t. Once you file for bankruptcy, your retirement plan, as well as your 401k is considered a legal exemption, meaning the money you have there is safeguarded against creditors.
No court will ask you to take out retirement money to pay your debts, and generally, the law allows you to keep your retirement account (under $1M). However, warn Jacksonville bankruptcy lawyers, once you’ve taken that money out, it no longer has any legal protection, and you will most likely lose it.
- Avoid large transactions with family members or close friends.
You might just owe your uncle some money, and that’s fair. However, once you file for bankruptcy, the court trustees will look back at your financial decisions in the past year (at least). If the trustee identifies large transactions between yourself and a family member or friend (usually more than $1,000), they may be able to sue that person.
That’s because, in the eyes of the law, these transactions are seen as an attempt to conceal assets from the court. Not only will the trustees be able to sue your family member for that amount, but transactions perceived as dubious can get your case thrown out.
- Set your credit cards aside.
Handmade brown leather wallet with credit cards sitting on brown wooden stool; image by Two Paddles Axe and Leatherwork, via Unsplash.com.
A common mistake that Florida bankruptcy lawyers see all the time is running up your credit card debt before filing for bankruptcy. The best thing you can do is avoid using your credit cards at all, at least 2-3 months before filing.
That’s because you’ll have to pay back any large transaction (upward of $600) on a single credit card prior to filing. The same goes for large cash advances ($900 or more).
- Don’t mortgage your home.
It’s common for people to worry about losing their homes when filing for bankruptcy. Spurred on by that fear, as well as the desire to pay off debt, many people are tempted to take out a mortgage on their residence.
Once again, don’t. Not without seeking guidance from qualified Jacksonville bankruptcy lawyers. They’ll be able to tell you whether you risk losing your home or not. If you don’t, there’s no sense in taking on additional debt.
- Don’t attempt to hide your financial situation.
Many people try to “be clever” and lie, either to their attorney, the court, or sometimes both. If you’re truly looking for a fresh start, don’t lie. Be upfront about your financial situation – assets, debts, loans, wages.
When filing for bankruptcy, the court trustees will do a thorough job of combing through your financial situation. That means, they’ll most likely discover whatever it is you were attempting to hide, and it will not look well, in the eyes of the law.
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