Five Common Mistakes to Avoid When Filing Bankruptcy

The bankruptcy process can be challenging if you don’t follow the good advice from a well- qualified bankruptcy attorney. Individuals, businesses and families looking for debt relief make the following mistakes all too often:

  • Using secured debt to pay off unsecured debt. Avoid using second mortgages or home equity loans to pay off credit card or other unsecured debts. If you plan to file bankruptcy the court will probably discharge most of your unsecured debt. If you create a secured loan and miss making payments you risk losing your collateral.
  • Tapping into retirement accounts to eliminate debts. The Bankruptcy Code generally protects assets in qualified ERISA retirement accounts and other pension funds from creditors. Avoiding using these accounts to pay off debts if you are considering filing for bankruptcy.
  • Giving away your property or other assets. Illegal property transfers can void your bankruptcy and cost you money in fines. You can claim exemptions for certain valuable property such as cash, jewelry, cash and home equity. The bankruptcy trustees can recover non-exempt property once they discover the transfer.
  • Concealing required information from the bankruptcy process. Your bankruptcy petition must contain an accurate list of all your debts and assets. Although you can correct mistakes on your petition, you could face severe penalties for intentionally hiding information.
  • Ignoring pending collection lawsuits. Your creditors can file a lawsuit against you until you file your bankruptcy petition and the automatic stay goes into effect. You should make timely responses to any legal action to preserve your rights.

One of the worst mistakes you can make is to leave your attorney in the dark. Your Arkansas bankruptcy attorney can only protect your rights if you inform your attorney about your debts and assets.