Costly Mistakes When Filing for Bankruptcy On Your Own

If you’re seeking relief from financial stress, you may be considering filing for bankruptcy on your own. After all, why hire a lawyer when money is tight and you want to keep this process as low-cost as possible?

Here’s why. Filing for bankruptcy requires careful planning and an acute knowledge of every step of the long and arduous process. If there’s any chance of success, you cannot go into it with any uncertainties.

An experienced bankruptcy attorney is well-versed in the process and will help you navigate it more effectively so that you don’t make mistakes that could cost you a lot more in the long run.

Filing for Bankruptcy on Your Own Could Cost You

As much as it may seem that you’ll save money when filing for bankruptcy on your own, it could be devastating to your financial future. The following are some of the most common and costly mistakes people make when attempting to file for bankruptcy without an attorney. 

1. Filing for the Wrong Type of Bankruptcy

Many people attempting to file for bankruptcy without an attorney aren’t aware that there are different types of bankruptcy. Some are more common than others.

When it comes to filing as an individual, only Chapters 7, 11, and 13 are available. Chapter 11 is complex and costly, so it’s usually not a feasible choice for most. Meanwhile, the more common Chapters 7 and 13 have distinct differences. Chapter 7 bankruptcy focuses on liquidating assets while Chapter 13 on debt repayment.

Choosing the wrong chapter could result in catastrophic consequences including losing property you have worked hard to own or the inability to discharge certain debts.

2. Failing to File Paperwork Correctly

Filing the paperwork for bankruptcy is no walk in the park. It is daunting, to say the least. There are multiple forms requiring full disclosure of your assets, debt, income, expenses, and complete financial history.

You’ll need to accurately report ALL of this information. Failure to do so could result in  the dismissal of your case, the denial of your discharge and additional fees to refile. It could be considered perjury and, therefore, subject to investigation or prosecution by the Federal Government.

3. Accumulating New Debt Before Filing

On occasion, once people make the decision to file for bankruptcy on their own, they take cash advances or make credit card purchases in the weeks leading up to their filing. The thought is, why not? I’m filing for bankruptcy anyhow.

The problem is that some of these purchases can be deemed “presumptive fraud” (especially luxury items) and would not be eligible for discharge during the bankruptcy process.

4. Not Filing at the Right Time

Without the counsel of an experienced bankruptcy attorney, it can be difficult to know the right time to file. This is one of the top bankruptcy mistakes. For example, if you know you’ll be incurring medical debt or dealing with unemployment in the near future, you may want to wait to file. On the other hand, if you already have wage garnishment in place, it may be inadvisable to wait.

5. Transferring or Selling Assets

Fearful of losing certain assets, people who file on their own often attempt to transfer or sell such assets to friends or family so the bankruptcy trustee cannot sell them. This is generally ineffective because the trustee will uncover and then address these attempts to preserve assets. The transactions will be undone and the funds redistributed to the creditors. In some cases, they may be considered fraudulent  – which would incur further costly penalties and may result in the denial of your discharge.

6. Repaying Loans Before Filing

Those facing bankruptcy may repay loans to friends, relatives, and preferred creditors within a set specific timeframe before filing. Just as in the case of transferring and selling assets, the bankruptcy trustee could deem this a preferential transfer and initiate an adversarial proceeding to reclaim the funds and redistribute them.

In addition, it is ill-advised to speak with creditors (even if they’re friends and family members) after filing for bankruptcy – as doing so could potentially harm your petition and undermine the effectiveness of the process. All correspondence should be handled by a bankruptcy attorney at this point.

Avoid Costly Mistakes When Filing for Bankruptcy

Filing for bankruptcy on your own to save money can be a financial death trap. Navigating the process is tricky, to say the least. And mistakes will not only put you at risk for rejection of your petition but can lead to further financial hardship in trying to rectify them.

If you truly want to save money, seek the legal counsel of an experienced bankruptcy team to ensure you avoid such mistakes.

The skilled bankruptcy lawyers at Gold, Lange, Majoros, and Smalarz, PC, are here to help. Contact us today. With 135+ years of bankruptcy law experience, our only goal is to help you get the fresh start you deserve!