There are many common mistakes that are often made before and during the bankruptcy process. Here is a short list of them:
Repaying money to relatives
If you repay a relative anytime during the year prior to filing bankruptcy, the trustee can sue the relative to receive the money back to distribute to all of your creditors equally.
Not listing all creditors
Make sure to list every single person or company you owe money to. Only if this list is completely accurate and complete will those debts be discharged at bankruptcy.
Transferring Assets
Shifting assets to your children's name or a relative just prior to filing for bankruptcy is not permitted.
Concealing Assets
Bankruptcy laws require full disclosure of all assets. The FBI fraud division, IRS auditors, and the Executive Office of the U.S. Trustee investigate bankruptcy filings. They will eventually find your assets even if you do not have them listed in your paperwork. It is a federal crime, a felony, to commit bankruptcy fraud. Do not take chances.
Credit Consolidation
Be careful about credit consolidation companies. The airwaves are inundated with consolidation companies urging their solutions as a way to "avoid bankruptcy." However, even if you negotiate lower payments or a restructure your debt outside of bankruptcy, your credit score is still adversely affected just as with bankruptcy. You also should be aware that there could be income tax liability. In addition, don't be fooled, "not-for-profit" doesn't mean "free." These organizations are typically capitalized by banks and the credit card industry because they want to try to collect as much money from you as possible.
