Bankruptcy Filing Mistakes to Avoid | Columbus Bankruptcy Help
Filing for bankruptcy is a serious financial decision that can provide relief from overwhelming debt, but it's also a complex legal process with many potential pitfalls. Each year, hundreds of thousands of Americans seek bankruptcy protection, yet many make avoidable errors that can complicate their cases, delay their debt relief, or even result in their cases being dismissed.
The most common mistakes when filing for bankruptcy include hiding assets, transferring property before filing, running up credit card debt, failing to list all creditors, missing required paperwork, choosing the wrong type of bankruptcy, not completing credit counseling, ignoring tax returns, and trying to file without professional help. These errors can derail your bankruptcy case and prevent you from getting the fresh financial start you need. Understanding these mistakes can help you navigate the bankruptcy process more successfully.
When considering bankruptcy, it's essential to approach the process with complete honesty and thorough preparation. As an attorney who has guided many clients through bankruptcy, I've witnessed firsthand how these common mistakes can turn what should be a path to financial freedom into an even more stressful situation. Let me share some insights to help you avoid these pitfalls and improve your chances of a successful bankruptcy filing.
Hiding Assets or Not Disclosing All Property
When you file for bankruptcy, you must tell about everything you own. This means your home, your car, money in the bank, and things like tools or jewelry.
Some people try to hide what they own. They might give things to family members or not list all their bank accounts. This is a big mistake. The bankruptcy court looks at all your records. They can find hidden assets.
If you hide things, the court may throw out your whole case. You could even face criminal charges for lying. It's never worth the risk. Always tell the truth about what you own, even if you think you might lose it. Many things are protected anyway through exemptions.
The right path is to list everything you own and let your attorney help you figure out what you can keep. Most people can keep basic items they need for daily life and work.
Transferring Property Before Filing
Some folks think they can give away property or sell it cheap to friends before filing. They plan to get it back later. This does not work. It's called a fraudulent transfer.
The bankruptcy trustee looks back at transfers made during the last few years. If they find you moved assets to avoid creditors, they can:
Take back the property you transferred
Deny your discharge of debts
Dismiss your case entirely
The court expects you to be honest about your property. Trying to hide transfers only makes your situation worse. Trustees know all the common tricks people try.
If you sold something before filing, make sure it was for a fair price and keep records of the sale and what you did with the money.
Running Up Credit Card Debt Before Filing
Using credit cards when you know you can't pay them back is a serious error. Some people go on shopping sprees right before filing bankruptcy. They buy luxury items or take cash advances.
The court sees this as fraud. Debts from luxury purchases over $725 within 90 days of filing might not be forgiven. Cash advances over $1,000 within 70 days might stay with you too.
The court looks at your recent credit card statements. They check for unusual spending. If they find it, those debts might not go away in bankruptcy.
Use credit cards only for true needs if you think you might file bankruptcy soon. Better yet, stop using them completely once you start thinking about filing.
Failing to List All Creditors
You must list every person or company you owe money to in your bankruptcy papers. Missing even one creditor is a problem. Some people leave out:
Loans from family members
Small debts they want to pay anyway
Creditors they like or want to keep working with
This is a major mistake. All debts must be listed, even if you plan to pay them later. Unlisted debts might not be discharged, which means you'll still owe them after bankruptcy.
Also, leaving out creditors isn't fair to the ones you did list. Bankruptcy treats all similar creditors equally.
Make a complete list of everyone you owe money to. Check your credit report to make sure you haven't forgotten anyone.
Missing or Incomplete Paperwork
Bankruptcy requires many forms and documents. Missing even one can delay your case or get it dismissed. You need to provide:
Income proof (pay stubs, tax returns)
Bank statements
Property value information
Credit counseling certificates
Monthly expense details
Courts have strict rules about when these papers are due. Missing deadlines is a common reason cases get thrown out.
Keep copies of everything you submit. If something gets lost, you can provide it again quickly. Follow up to make sure all your papers were received.
Organization helps a lot. Keep a folder with all your bankruptcy papers and a list of what you've submitted and when.
Choosing the Wrong Type of Bankruptcy
Two main types of bankruptcy exist for most people: Chapter 7 and Chapter 13. Picking the wrong one for your situation wastes time and money.
Chapter 7 wipes out most debts in about 4-6 months. But you might lose property and you must have income below certain limits.
Chapter 13 lets you keep property and pay back some debts over 3-5 years. It works for people with regular income who can make monthly payments.
Some people file Chapter 7 when they should file Chapter 13, or the other way around. This mistake can lead to dismissed cases or lost property.
Talk with a bankruptcy attorney about which type fits your situation best. The right choice depends on your income, property, and types of debt.
Not Completing Credit Counseling
The law requires two financial counseling courses when you file for bankruptcy:
Credit counseling within 180 days before filing
Debtor education after filing but before discharge
Skipping either one means your case can be dismissed or your debts won't be discharged. Both courses can be done online or by phone and usually cost about $25-50 each.
Make sure you get certificates showing you completed both courses. File these certificates with the court on time.
These courses actually help many people learn to manage money better after bankruptcy. Take them seriously as part of your fresh start.
Ignoring Tax Return Requirements
You must provide tax returns to the trustee. If you haven't filed taxes in recent years, this becomes a big problem.
The bankruptcy trustee needs your most recent tax return before your meeting of creditors. In Chapter 13 cases, you need tax returns for the last four years.
If you haven't filed required tax returns, your bankruptcy case might be dismissed. Get caught up on tax filing before you file for bankruptcy.
Even if you owe taxes and can't pay them, still file the returns. Many tax debts can be discharged in bankruptcy if they're old enough and you filed the returns on time.
Trying to File Without Professional Help
Some people try to save money by filing bankruptcy without an attorney. This is called filing "pro se" and often leads to mistakes.
Bankruptcy law is complicated. The forms are confusing. One mistake can get your case dismissed or result in losing property you could have kept.
Studies show people filing without attorneys are much more likely to have their cases dismissed. They often miss deadlines, fill out forms wrong, or don't claim all the exemptions they deserve.
A good bankruptcy attorney costs money, but they help you keep more property and make sure your case succeeds. They know local rules and trustees. Most offer payment plans to make their services affordable.
Conclusion: The Path to a Successful Bankruptcy
Filing for bankruptcy provides a path to a fresh financial start, but only when done correctly. By avoiding these common mistakes, you improve your chances of a successful case that discharges your debts and helps you rebuild your financial life.
As an attorney who has helped many clients through bankruptcy, I've seen how proper preparation makes all the difference. Honesty, thoroughness, and attention to detail are your best tools for a smooth bankruptcy process.
If you're considering bankruptcy in the Reynoldsburg or Columbus, Ohio area, I'm here to help. At Christopher Gallutia, Attorney at Law, we provide experienced guidance through bankruptcy filings, credit and debt counseling, and tax resolution. Our team understands the legal system inside and out, enabling us to provide valuable advice tailored to your specific situation.
Don't let avoidable mistakes derail your financial fresh start. Contact our office today for a consultation to discuss your options and create a plan for moving forward toward financial freedom.