There are some common mistakes made before and during the bankruptcy process. Here is a short list of them:
- Repaying money to relatives
If you repaid a relative in the year before you filed for bankruptcy, court can require that person to return money distributed, and redistribute those funds equally to your creditors.
- Hiding creditors
List every person or company to which you owe money. You cannot discharge a debt that is not disclosed on your list.
- Transferring Assets
You cannot shift assets to a child's name or give them to a relative just before you file for bankruptcy.
- Concealing Assets
Bankruptcy laws require that you fully disclose all of all assets. The FBI fraud division, IRS auditors, and the U.S. Trustee examine bankruptcy filings. Even if your assets are not listed in your paperwork, they will be found. It is a federal crime-a-felony, to commit bankruptcy fraud. Do not attempt this.
- Credit Consolidation
The airwaves are inundated with consolidation companies promising to help you "avoid bankruptcy." However, even if you negotiate lower payments or restructure your debt outside of bankruptcy, your credit score will be adversely affected and you could incur tax liability. Remember, too, that "not-for-profit" doesn't mean "free." These organizations are often funded by banks and the credit card industry to try to collect as much money from you as possible.