Feeling that you have to declare bankruptcy in order to regain control of your finances could be the first step towards getting back on track financially, but making mistakes before starting the process can further complicate your situation. If you are considering bankruptcy in the USA, it’s essential to know what to do—and what not to do—before applying. Below we explain the most common mistakes and how to avoid them.
Key Takeaways
- Honesty is essential in the bankruptcy process: Hiding income, assets or transfers can have serious legal consequences and risks the approval of the case.
- Specialized legal guidance makes the difference: Hiring an experienced California bankruptcy attorney ensures that strategic decisions are made and procedural errors are avoided.
- Avoid impulsive decisions regarding debt: Continuing to use credit cards or take out loans before filing can hurt your case and delay the financial protection you seek.
1. Transfer assets to family or friends
One of the biggest mistakes often made before declaring bankruptcy in America is trying to protect your assets by transferring them into someone else’s name. Although it may seem like a quick fix, courts may consider this as fraud, which could jeopardize your bankruptcy case and even lead to legal sanctions.
How to avoid it: Before making any decisions regarding your assets, consult with a bankruptcy lawyer in Los Angeles or in your city. A lawyer will know how to guide you on what is allowed and what can harm your application.
2. Accumulate more debt just before declaring
Some people, knowing that they will file for bankruptcy, decide to make purchases with credit cards or take out loans thinking that those debts will disappear. However, debts acquired shortly before filing can be considered non-dischargeable debts if the court determines that there was bad faith involved.
How to avoid this mistake: If you are already considering filing for bankruptcy, avoid continuing to draw on your lines of credit. Talk to a lawyer as soon as possible.
3. Not disclosing all your income and assets
Withholding financial information when filing your case can lead to the dismissal of your application or, worse yet, charges of fraud.
How to avoid it: Be completely transparent. Your attorney will help you present all required documentation properly and honestly.
4. Not hiring a specialized lawyer
Many people try to file bankruptcy on their own to save money, but end up making mistakes that can cost them much more in the long run. Bankruptcy laws in California have particularities that may affect your eligibility and the outcome of your case.
How to avoid it: Look for a bankruptcy lawyer in Los Angeles with experience in your type of situation. A lawyer can advise you on whether you should declare Chapter 7 bankruptcy or Chapter 13, and help you protect your assets within the legal framework.
5. Ignore lawsuits or legal notices
Receiving a creditor lawsuit or court notice and failing to respond in a timely manner can seriously harm your case. Even if you plan to file for bankruptcy, ignoring these documents can result in liens or judgments against you.
How to avoid it: If you receive any legal communication related to your debts, inform your attorney immediately and act quickly.
Should I declare bankruptcy? How to do it in the USA
If you have already decided to file for bankruptcy in the United States, it is time to contact a lawyer specialized in this area and take the appropriate steps to do so without making mistakes.
The process for declaring bankruptcy in the USA involves several key steps:
- Evaluate your financial situation.
- Decide between Chapter 7 and Chapter 13.
- Complete the credit counseling course.
- Gather and present all required documentation.
- Attend the hearing with the trustee.
- Complete a financial education course posterior.
A bankruptcy lawyer in California can be with you every step of the way, ensuring your case is handled correctly from the start.
Conclusion
Filing for bankruptcy doesn’t have to be a scary experience, as long as you avoid these common mistakes and seek the right advice. The key is to act honestly, with preparation, and, above all, with the help of a lawyer with experience in bankruptcy in California. If you are in the area, look for a bankruptcy lawyer in Los Angeles. It is an excellent first step to regaining your financial stability.
Need help getting started? Don’t hesitate to seek professional guidance and protect your future today. At SB Legal we are ready to offer you our support with a free initial consultation. ¡Contact us today!
Frequently Asked Questions
What happens to my basic services such as electricity or water if I declare bankruptcy?
Utilities are not automatically shut off by filing for bankruptcy. However, if you have debts with them, they may require an additional deposit to continue providing the service. It is important to plan this ahead of time.
Can I lose my job if I file for bankruptcy?
Federal law prohibits employers from firing you solely for filing bankruptcy. However, there could be implications if your job involves handling money or requires a credit evaluation, such as in some financial or government positions.
How does bankruptcy affect a cosigner or cosigner on my loans?
If another person co-signed you on a loan and you file for bankruptcy, the creditor can still try to collect the debt from the co-signer, especially in a Chapter 7 bankruptcy. There are specific protections in Chapter 13, but it is important to discuss them with an attorney.
