Filing for personal bankruptcy can offer Florida residents a way to tackle overwhelming financial difficulties. However, many people end up making mistakes that can complicate the process and prevent them from getting the relief they could have received.
If you read this and realize you may have committed one of these errors, do not assume all is lost. Depending on the situation, an experienced bankruptcy attorney may be able to come up with effective solutions to help you get your Chapter 7 or Chapter 13 filing back on track.
Putting off the inevitable
When faced with troublesome debt, most people do not immediately start filing for bankruptcy. Instead, they look for ways to avoid having to do so. Sometimes, these solutions can do more harm than good and do not end up preventing bankruptcy.
Emptying retirement accounts
You owe a lot of money, and here you have all these funds just sitting there in your retirement accounts. Resist the temptation to use them, even if you think you still have many years to fill them up again. Many types of retirement plans qualify as exempt assets during bankruptcy, which means you will get to keep them throughout. You should not undermine your retirement security to temporarily stave off current creditors and likely end up having to file for bankruptcy anyway.
Risking your home
Similarly, some take out a second mortgage to pay off debt. This can be a risky move. Both types of personal bankruptcy filings can allow you to keep your home; however, if you begin missing payments, you can jeopardize your homeownership.
Neglecting to consider timing
Poorly timing your bankruptcy filing can have various negative consequences. If you have just made a large purchase or taken out a substantial cash advance, filing right afterward can make your spending look like an intentional attempt to defraud creditors. If you receive a tax refund shortly before filing, you may end up losing it to the bankruptcy estate.
Preferential treatment for friends and family
When it comes to bankruptcy, you must treat friends and relatives the same way you treat your credit card company. As part of the process, you will have to compile a complete creditor list; do not forget to include money you borrowed from your family. You may also not leave this type of creditor out of the bankruptcy process by repaying debts right before you file. The trustee may sue to recover preferential payments.