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5 mistakes to avoid when you file for bankruptcy

When you are trying to tunnel through a mountain of debt, you may have decided that bankruptcy is your best way forward.

You are relieved to have made this decision, but also apprehensive. Bankruptcy is a big step and a whole new experience. You want the process to go smoothly, so here are five potential missteps to avoid:

1. Failing to list all creditors

Think carefully as you prepare your list of creditors to make sure you include everyone. You are required by law to list them all, with no exceptions.

2. Hiding certain assets

You may be tempted to keep an extra checking account or a particular investment out of sight when you file for bankruptcy. Hiding assets is against the law. It is called bankruptcy fraud, and you risk fines and possible jail time.

3. Repaying a family debt

You may wish to repay a debt to a family member prior to filing. However, this might be construed as "preferential," and your family member may be required to remit that payment to the bankruptcy trustee.

4. Indulging in a shopping spree

Do not have the attitude that going on a spending spree is no big thing. Any purchases made on your credit cards just prior to your bankruptcy filing might not be dischargeable.

5. Putting it off

Once you have decided to file for bankruptcy, act on that decision. Delaying will only result in more delinquent bills and collection efforts, and your mountain of debt will only grow larger and more oppressive.

Rejecting the myths

Your apprehension may stem from the myths that have cropped up about bankruptcy. For example, you may be concerned about losing your home or other important possessions once you file. An experienced attorney will assure you that bankruptcy allows the debtor to retain certain assets and rebuild credit. You can look forward to a much-improved financial future, so avoid missteps when filing for bankruptcy. Just focus on the light at the end of the tunnel.

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We help people file for bankruptcy relief under the Bankruptcy Code.