What Not To Do When Filing for Bankruptcy in Illinois
Knowing what not to do when filing for bankruptcy is just as important as learning what you need to do. Making mistakes in the bankruptcy process can cost you time, money, and even your car or home. An experienced DebtStoppers bankruptcy attorney can help you avoid these common mistakes people make when filing for bankruptcy.
Don't File the Wrong Type of Bankruptcy.
There are several different kinds of bankruptcy you can file, including Chapter 7 and Chapter 13. It is important to understand both before you make a decision.
With Chapter 7, you can eliminate your unsecured debts, such as credit card debt, medical bills, and motor vehicle loans.
However, Chapter 7 will typically not eliminate alimony or child support payments or student loans.
Under Chapter 7, some of your personal property can be sold to repay your creditors. This is an important consideration when deciding which type of bankruptcy is right for you.
Another factor to keep in mind is your household income. To qualify for Chapter 7, you must pass the "means test," which requires your monthly income or disposable income to be lower than a certain threshold. So if you make too much, you won't be able to file Chapter 7.
Under Chapter 13, your debt is reduced and reorganized into an affordable 3-to-5-year repayment plan. Instead of paying your creditors directly, you will make monthly payments to a bankruptcy trustee. This type of bankruptcy is more flexible, allowing more types of debt to be included in your payment plan.
With Chapter 13, you should be able to keep your home, car, and other assets, so this can be a good option for someone who has money coming in. It's also the only option for those who do not qualify for Chapter 7.
Don't Give Away Money, Max Out Your Credit Card, or Hide Assets.
If you have filed for bankruptcy or are considering it, you should avoid frivolous and significant spending. This is almost guaranteed to jeopardize your situation, as the courts always examine the last two years of your spending before granting a bankruptcy discharge.
Stick to necessities. If you spend extravagantly before filing, the bankruptcy judge may think you’re trying to pull one over on them. You should also avoid giving money away or making selective loan repayments to friends and family, as this can also make it look like you are gaming the system.
Don't Wait Too Long To File.
Bankruptcy can offer substantial debt relief, but if you wait too long, it could end up costing you. If you continue to take out loans to try to pay off other debt or spend all your savings and retirement assets, you could end up with significantly more debt than if you had filed when you first got into financial trouble.
There are other benefits to filing sooner rather than later. If your home is in foreclosure, filing for bankruptcy can stop this process. The same is true if your car is about to be repossessed. A bankruptcy filing can stop this process and allow you to keep your vehicle.
Don't Try To Do it Yourself.
One of the most damaging mistakes you can make is to try to file for bankruptcy on your own without the help of an attorney. Many people want to avoid paying a lawyer because they’re already in financial trouble, but this can have devastating effects in the long run.
A bankruptcy lawyer can ensure that you file for the correct type of bankruptcy and receive all possible benefits. You don’t want to give up property or assets you are entitled to keep.
Your attorney can walk you through each step to ensure you aren’t making mistakes that could cost you money in the future. They will also protect you from missteps, such as spending large amounts of money before and after filing.
Your bankruptcy journey may be difficult, but admitting you need help is often the hardest step. If you have questions or need assistance getting the process started, DebtStoppers is here for you. Contact us today to request a free consultation with one of our knowledgeable bankruptcy lawyers and receive the help you deserve.