Bankruptcy is not a game. The courts take the rules very seriously and can file criminal charges if intentional fraud is committed. They can even dismiss the entire case or refuse to discharge a particular debt. So it’s a good idea to plan a bankruptcy in advance of filing and find a way to reach the best possible result. However this must be done within the rules of the bankruptcy code. Avoiding actions on the prohibited is quite important when considering the dos and don’ts before bankruptcy. This is because making poor decisions before bankruptcy may prevent you from getting debt relief.
Below are some of the more common mistakes to avoid.
- Don’t Hide Property
It’s worse if the court charges you with fraud or dismisses your entire case, because you hid property from the bankruptcy trustee. Don’t give your property away or putting it in other people’s name to avoid having to list it on your bankruptcy statements. If you owe money to a business partner or family member, it will be recovered from them by the trustee. The point of bankruptcy is to distribute property legally and fairly among your creditors.
- Don’t Provide Incomplete, Inaccurate or Dishonest Information
You are required to provide accurate and complete information about all of your debts, assets, income, expenses and financial history. You do so under penalty of perjury. You could be subjected to criminal prosecution if you knowingly misrepresent your information, such as fail to disclose an asset. You have to make sure to include all of the information requested and not leave lines or boxes o blank unless the question really does not apply to you. You may have to file additional papers to correct the paperwork and pay more fees if you leave something if you forget to include an asset and it is discovered later, your Chapter 7 trustee may take that property. The bankruptcy court may dismiss your case or deny you a discharge if you do not file all of the paperwork and forget to include schedules or forms.
- Don’t Fail to File Income Tax Returns
If you have not filed all of your income tax returns for at least the two years prior to filing bankruptcy, it not only makes completing your petition, statement of financial affairs, schedules next-to-impossible, it also stops your bankruptcy in its tracks because your tax returns are crucial to determine your past and current earnings and asset holdings, as well as satisfying potential priority tax claims. There is no way to determine your tax obligations until a tax assessment has been made.
- Don’t Lose Exemptions
It’s an excellent idea to look at the property exemptions available to you either under your state’s laws or the federal exemptions before filling. Most states allow generous exemptions of equity in a homestead and investments held in pensions or retirement accounts. Don’t stop making payments on property you want to keep but limit those payments to what you can afford without borrowing more money or withdrawing from exempt equity.