Filing For Chapter 7 Bankruptcy? Don't Make These Mistakes

Posted on: 27 May 2020

If you have decided to use bankruptcy to get yourself out of a tough financial situation, know that you only have one chance to do it right. Don't make these mistakes when using Chapter 7 bankruptcy.

Forgetting To List All Creditors

All debts and creditors must be listed on your bankruptcy petition in order for your debts to be discharged. If you accidentally leave a debt or creditor off of that petition, you will still be responsible for paying it back after your bankruptcy is finalized. That is why you must be incredibly thorough when listing your debts since there is no way to add a debt to your bankruptcy after it has been approved. 

Making Preferential Payments

One aspect of bankruptcy to be aware of is preferential payments. These are when you selectively pay back creditors and then file for bankruptcy, giving some of them back the money they are owed while leaving others high and dry. This often happens when someone wants to pay back a small local business that they owe money to but also owe a major credit card company or another big business money and prefer to have those debts discharged. This is illegal and could result in the preferential payment being clawed back and dispersed to all creditors. 

The misconception regarding preferential payments is the timeframe since many people do not realize that preferential payments made within one year of your filing may be investigated. The time period does not start from the moment you decide to file for bankruptcy, which may be much shorter than that. If you want a creditor to hold onto a payment that you've made to them, you must wait until a year after the payment has been made. 

Transferring Assets To Other People

If you are worried about certain assets being liquidated to pay for debts, you may think that you can get away with saving those items by transferring them to another person. Not only will this be caught during the bankruptcy proceedings, but it is illegal to do so. Any large assets that must be legally transferred, such as a home or vehicle, have a very clear paper trail that can be traced back.

These are just a few of the mistakes people make when handling a bankruptcy case. For assistance navigating all the laws regarding your bankruptcy, be sure to work with a local bankruptcy lawyer. Visit websites like to learn more.