Some of the Most Common Mistakes When Filing Bankruptcy
A bankruptcy filing is a good option when it comes to getting rid of debt or handling it more efficiently. As straightforward as it is, bankruptcy filing does come with certain rules. People who don’t have the legal and administrative knowledge to go through the process could potentially commit an array of serious mistakes. Let’s see what are most common mistakes when filing bankruptcy.
Transferring Property to Family Members in Advance
Selling property and assets before the bankruptcy filing or transferring those to a family member could eventually raise a red flag. Depending on the specifics of the situation (for example, selling to someone at way below the market price of the respective item or property), the person may even be investigated for bankruptcy fraud.
This mistake is often committed because people worry that all of their assets will be liquidated for the purpose of paying off debt. This isn’t the case.
Arizona, just like all other states, has bankruptcy exemptions. These are assets and property types that a person gets to keep. The exceptions are not affected by the liquidation. Acquainting yourself with these rules will show you that it is not necessary to get rid of valuables before the filing. In fact, such behavior can lead to many additional problems down the line.
Choosing the Wrong Bankruptcy Chapter
There are two primary options to choose among – Chapter 7 and Chapter 13 bankruptcy filing.
Chapter 7 bankruptcies allow for the elimination of debt. In order to apply for this one, a person in Arizona will have to pass the means test. Chapter 13 allows for debt restructuring. A payment plan will be crafted for the next three to five years. Upon the completion of the payment period, remaining debt will be discharged.
Most people want to opt for Chapter 7 bankruptcy because it allows for debt liquidation. This isn’t always the best case scenario. If you have the means to pay off some of the debt, you may be better off doing a Chapter 13 filing. Talking to an experienced bankruptcy attorney in Arizona will make it easier to choose the option that is better suited to your circumstances.
Filing the Wrong Documents or Failing to Provide Some Papers Needed by Court
This is one of the most common mistakes when filing bankruptcy, among people who choose to complete the process on their own and without getting a bankruptcy attorney to help them.
A packet of documents has to be completed for a successful bankruptcy filing. A mistake in the forms or a failure to submit all required documents could lead to a dismissal. Getting to know which documents are required and filing all of them correctly could be a time-consuming, challenging process.
A Failure to List a Creditor
Listing creditors is another key part of the process.
In an attempt to handle all filing processes at the same time, a debtor could easily skip one of the creditors. The paperwork should list both the creditors and the amount being owed to each. Based on the number of creditors, the task could become overwhelming.
An omission of a creditor is a violation of Arizona bankruptcy law. There’s still an option to correct the mistake but a fee will have to be paid for the addition of a skipped creditor to the list.
Choosing the Wrong Legal Representative
Hiring a bankruptcy attorney is the best way to deal with the common filing problems.
In order to benefit from a smooth and error-free process, however, you will have to do your research. It’s not a good idea to just hire the first Arizona attorney whose name pops up in your Google search. Check credentials and experience. Getting references and going through online testimonials will also prove to be beneficial.
Spending some time on researching attorneys will save you a lot of money and trouble in the long run. See a few different professionals and compare their approaches. In the end, you should opt for the bankruptcy attorney that makes you feel comfortable, that offers a comprehensive solution, that is easy to communicate with, and helps you avoid the common mistakes when filing bankruptcy.
