Bankruptcy is complicated and while it is a viable debt relief option for people struggling with debt, it is easy to make mistakes during the filing process. Some mistakes could cost individuals dearly. Keep reading for some of the most common mistakes individuals make during bankruptcy.
Mistake #1: Incorrect Filing
There are several types of bankruptcy available for filing. From Chapter 7 to Chapter 11 for businesses, each type has its own unique process and payoff, but because they are tailored to different situations, individual types of bankruptcy may not be for everyone.
Some bankruptcy chapters are for individuals only like Chapters 7 and 13 while Chapters 11 and 15 are for foreign cases and large corporations. Different still is Chapter 12 which is for family farmers only. Each type of bankruptcy requires a different amount of effort, funds, and time.
If an individual has a significant amount of disposable income files for Chapter 7 liquidation, they could lose more in the liquidation process than they would if they correctly filed for Chapter 13 reorganization. It is crucial that any person or organization file for the right type of bankruptcy.
Mistake #2: Waiting Too Long or Refusing to File
Bankruptcy is an involved process that can leave a mark. Filing for bankruptcy does impact credit scores and should not be taken lightly. However, despite how scary and misunderstood bankruptcy may be, it could be more damaging to wait too long to take control of debt or refuse to address it at all.
Waiting too long to address debt problems is a sure fire way to compound them. The longer certain debts accrue, the more interest a person may owe and they will get farther from reducing the principle amount. Individuals struggling with debt should take action as soon as possible before it’s too late.
Similarly, for people with extreme debt, deciding against bankruptcy could be disastrous. Refusing to even consider bankruptcy could lead to more debt in the future. It’s crucial that individuals in extreme debt not incur more. Bankruptcy is a less harmful option than payday loans or more credit cards.
Mistake #3: Not Hiring an Attorney
While it is possible to file for bankruptcy without the assistance of an attorney, it may not be wise to do so. As mentioned previously, bankruptcy is an extremely complicated process with numerous steps and contingencies that can impact an individual’s eligibility for bankruptcy and jeopardize their financial future.
An attorney can help prospective filers with their cases by informing them of their rights and options from the type of bankruptcy they should file to the limitations of creditors. In some cases, creditors may attempt to collect during an ongoing case despite court orders that restrict them from doing so. Not only is this a violation of an automatic stay, but it is also a gross violation of a debtor’s rights during bankruptcy.
An attorney can help individuals and companies take action against similar actions and advocate for their best interests during bankruptcy. When a bankruptcy filing is handled correctly, a person’s ability to bounce back is improved exponentially.
Entrust Your Case to Seni Popat
Bankruptcy can be intimidating and is often misunderstood. Our bankruptcy attorney can help you understand your options and guide you through the process so you can get the debt relief and peace of mind you deserve.