Filing for bankruptcy is sometimes a long and stressful process, requiring your full attention and accuracy in everything: from filling the forms to calculating the income, expenses, and debts. Needless to say, but a single mistake may cost you a refusal from the U.S. court. As a result you will be banned from the possibility to file again for the nearest 6 months, besides – you will lose the fee you’ve paid to the court for sending your petition.
What is worse, your occasional mistake in income or debt calculations could be taken by the judge as fraudulent information with the relevant consequences. In order to avoid mistakes, you may hire a bankruptcy attorney (which will cost you pretty much). Another way – is to learn how to file without attorney, following rules and instructions strictly. Here is the list of most common mistakes made by debtors and these mistakes did cost them time, money and a chance to have a new financial start.
1.Filing for bankruptcy when it is unnecessary
Depending on your personal circumstances, filing for bankruptcy could be a wrong decision. For example, if you have a pool of non-dischargeable debts (like student’s loan, child support, taxes, etc.). Filing for bankruptcy is also unnecessary if you have considerable income and your expenses are not that large, so you may afford to repay the debts.
2. Filing for the wrong chapter
Usually, everyone tries to start with the easiest Chapter 7, which is called straight bankruptcy and allows a debtor to get rid of all debts at once. Still, in a major part of cases, it turns out that the debtor’s income is high enough to repay at least a fracture of total debt. Therefore, before filing for the certain chapter you should pass the Means test and estimate the total amount of your debt. For example, Chapter 13 has the debt ceiling for secured and unsecured debts. If your debt exceeds the limit, you simply will not qualify for this Chapter.
3. Not filling in the forms correctly and completely
The one single mistake or a skipped unanswered field may negate all your efforts and cost you precious time and a 335$ fee (non-refundable). In this case, if you are not sure you can do papers in a proper way – get a help of a bankruptcy specialist. It will not cost you much but it will save you from frustrating petition rejection.
4. Using incorrect exemption system with your property
As you may already know, there is exempt and non-exempt property. If you file for Chapter 7 you should be ready to have your assets withdrawn in exchange of the instant debt liquidation. Still, the law allows you to keep so-called exempt property which is usually are modern life necessities like clothing, some furniture, cheap appliances and (in some cases) a car. By using the wrong system of estimating what you can keep and what will be withdrawn you may lose more of your property than you have expected.
5. Failing to make the first payment timely according to the plan
If the person files under Chapter 13, according to repayment plan he/she must make the first payment to creditors within 30 days since the day of sending the petition to the court. Even if the petition is not approved yet, the payment must be made timely. If the judge finds out the 30 days payment rule is violated, the petition will be dismissed.
6. Violating rules and procedure
Many districts have own specific rules and procedures when it comes to filing for bankruptcy, so you are advised to read thoroughly your domestic law instructors. That means that steps and order of steps which should be taken by the debtor on their way to successful bankruptcy may vary significantly.
7. Using the incorrect data in the Means test
Do not even try to fool the court, manipulating the digits while passing the Means test. If the judge finds out your papers are fraudulent, not only your petition will be dismissed, but also you may be banned from filing for bankruptcy again for years. In more serious cases the debtor may face a legal punishment.
Needless to say, buy if the Means test shows you do not qualify for Chapter 7, there is no way you should try your “luck” to file for it. All numbers and all you provide the court with will be thoroughly analyzed and the mistakes or misinformation revealed.
8. Not including all dischargeable loans into petition
This is the mistake many do when filling the list of debts, especially when there are dozens of them. It is totally up to the debtor to list each loan he asks the court to discharge. If after the petition is approved the debtor finds out he/she forgot to include a certain loan in the list, he will be obliged to repay this loan even after the bankruptcy is announced. That means, even being bankrupt you will not be protected by the law from the actions of that particular creditor and collectors.
9. Not attending the meeting of creditors
This is the important pre-hearing step where all (of major) creditors meet with you as a debtor and ask questions about your reorganization plan and bankruptcy. It’s highly important to come to an agreement with creditors concerning repayment plan, as based on this the court will make a decision about your petition.
10. Not sending documents to a Trustee in time
After your petition is received by the court, you will be appointed a Trustee, a person who watches over and manages your bankruptcy documents before the final hearing in the court. The Trustee also arranges the creditors meeting. The big mistake is not sending him required documents minimum 7 days before your hearing. If a Trustee finds mistakes in your papers right before the hearing, you will simply not have enough time to fix it, so your petition will be dismissed.
Now, when you are armed with knowledge, you may file for bankruptcy without hiring an expensive attorney.
Be confident, be honest and a good luck with starting your life with the blank sheet!