Bankruptcy is an excellent alternative for individuals seeking debt relief with a fresh start. Bankruptcy allows you to discharge different debts such as credit cards, medical bills, etc. while protecting few assets. In case you are in a difficult financial situation due to a recent divorce or loss of income and debts are increasing, filing bankruptcy might seem an ideal solution. However, before you file bankruptcy, you need to avoid a few significant things such as:
- Using Credit Card
In the case of financial problems, the first that you need to do is stop using credit cards. Stop shopping for electronics, automobiles, clothing, or any kind of luxuries using a credit card right away. The more you spend, the more problems you would have. Along with avoiding the use of credit cards for shopping, it is advised not to take cash advances against the credit cards. Rather, you can continue to use your debit card connected to the bank account for buying things.
- Accepting Forthcoming Payments
It is important to understand that the payment you expect to get in the future would be part of the bankruptcy estate. Just like existing funds future money would also be used by bankruptcy trustees for repaying your credits. The future payments would include things like tax refunds, an inheritance, etc. You might not be able to stop such payments from coming. Therefore, it is essential to be aware and take appropriate action to prevent such payments to become a bankruptcy court’s property.
- Depositing Money in Bank Account
The money that comes from income sources needs to be deposited in the bank account. That income source could be your job or work outside of your daily job. Except these, avoid depositing additional money in the bank account. Deposition anything like a friend’s check or money of a relative or friend trying to help you needs to be avoided. In case you own any business do not make the transactions of business from the personal account. In order to avoid confusion as well as fraud appearance, ensure you keep each thing separate.
- Paying Off Creditors
Many people think that paying off a few debts before filing bankruptcy might help improve the chances. However, doing this might damage the case. In case you make a payment to pay off any creditor completely, it is known as a preferential transfer. This means you gave preference to one creditor rather than paying other creditors. There are chances that the bankruptcy trustee might sue that creditor to get the money back and distribute that fairly as well as equally.
Apart from this, another important thing that you need to avoid is transferring money or property. People think transferring money or assets like a car, house, etc. to any relative, or friend would make property safe from proceedings related to bankruptcy. However, this is wrong. Rather doing so could be considered fraud. In case you are looking forward to filing bankruptcy, consulting a reputed Bankruptcy law firm in Las Vegas, NV can help. From an experienced attorney, you can know the mistakes to avoid and appropriate legal options.