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Serious issues to avoid when filing bankruptcy

The economy of the country is still suffering from the blowback of the 2007 Economic Meltdown. US budgetary deficit has hit a record high of $1.4 trillion. The public debt load of the nation stands at a little over $15 trillion. That directly translates into $49, 868.61 per citizen. Since September 28th of 2007, the national debt has increased on an average by $4.02 billion per day. The statistics are a direct reflection of the financial condition of the country as well as her people. Debt has crept into every household and as of now, poses a serious threat to personal finance and the economic wellbeing of the average American family.

Most people caught in a difficult financial situation don’t think of filing bankruptcy as the primary debt solution. They would rather try to negotiate with their creditors or seek credit counseling. In doing so, most debtors run 2 major risks. One, they just might get sued by their creditors which would make matters worse. Two, debtors might resort to methods which would end up creating severe problems in case they do wish to file bankruptcy. Here are a few pointers which will help in easing the process of filing bankruptcy:

Cash advances and credit card run up – Most people are under the impression that all debts will be discharged if they successfully manage to file bankruptcy. It should be noted that bankruptcy laws presume certain debts to be non-dischargeable if the debt is in excess of $50000 and has been incurred within 90 days prior to filing bankruptcy. Since bankruptcy laws are also designed to protect creditors, the court won’t discharge the debt if they find that you have ‘transferred’ your outstanding balance from a credit card company to another credit card company. The creditor can dispute the claim in court since it is technically a cash advance.

Savings and retirement funds – Retirement funds like the 401(k) and other such federal savings plans are sometimes cashed in by people in a desperate attempt to get out of debt. Needless to say, it’s not a very good idea in case you want to have a shot at filing bankruptcy. Most savings funds in qualified ERISA accounts are exempt or rather ‘sheltered’ assets. Liquidating a retirement or benefit fund to pay off debt will simply result in unnecessarily destroying an asset to make payments on debts which are already out of control.

Manipulation of facts and disregard for court proceedings – People think that they can avoid the entire legal system and procedure simply by not appearing in court on the appointed day. It only tends to complicate matters and makes the process of filing bankruptcy even tougher. Truthfully divulging details pertaining to assets and their worth are essential to the filing process. Manipulating facts and figures can lead to imprisonment, fines, loss of assets and denial of the bankruptcy case.

New line of credit – This is one of the most common mistakes that people caught in a debt trap tend to make. Simply put, borrowing money to pay a debt is not advisable at all. In doing so, the debt ditch grows deeper and deeper until there is no way out. Getting a second mortgage or a new credit card is really not a good option in case filing bankruptcy is a probable way out of debt.

Property transfer – A transfer of property within 4 years of filing bankruptcy can be viewed by the court as an attempt to hinder, delay or defraud a rightful creditor. This will attract severe penalties and the motion to file bankruptcy maybe rejected altogether. A bankruptcy trustee can undo the transfer of property at will.

Bankruptcy can be a good solution to alleviate your financial worries but in a large number of cases, debtors fail to do so simply because they unknowingly make major errors. These errors culminate towards nullifying the debtor’s effort to file bankruptcy. Such simple mistakes are easily avoidable if the debtor is armed with the basic knowledge of how to handle a bankruptcy proceeding.

With proper help you can
  • Lower your monthly payments
  • Reduce credit card interest rates
  • Waive late fees
  • Reduce collection calls
  • Avoid bankruptcy
  • Have only one monthly payment
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