Filing bankruptcy is complicated and can result in mistakes if you aren’t careful. Failure to avoid common mistakes could result in your bankruptcy being dismissed. Knowing what to avoid can mean the difference between struggling financially, and getting back on the road to rebuilding your credit after bankruptcy.
Things to Consider When Filing Bankruptcy
Before you get on the road to rebuilding your credit after bankruptcy, there are some things you should consider before you file, such as:
- List all debts. Intentionally leaving off a debt could put your bankruptcy at risk.
- Use the right household size. Some courts count everyone living in the house, while others only count those who are financially interdependent, so it’s important to know the laws in your area.
- Report income accurately. Make sure that your income listed matches documentation.
- Take allowed deductions. Payments made under court order, such as in divorce or custody cases may be allowable. Taxes and insurance not escrowed may also be allowable.
- Actual mortgage payments vs. standard housing deductions. These are normally listed separately. You will not be able to claim actual mortgage payments if you do not plan to keep the house.
- File sooner rather than later. File bankruptcy before your situation puts emotional and financial stress on your family.
- Tell your attorney everything. Hiding things from your attorney will hurt you in the long run.
- Don’t use retirement accounts to pay debts. Retirement assets are usually exempt in bankruptcy, and you should be able to keep that money.
- Don’t list child support incorrectly. Child support that you are supposed to receive, but don’t, does not count as income. You also can’t list child support that you aren’t paying as an expense.
- Don’t take deductions that are not allowed. Retirement contributions, 401k loan repayments, and college expenses for your child are usually not allowable deductions. Also, be sure to list your cell phone as a utility, not separately.
- Don’t pay off secured collateral before filing bankruptcy. The equity becomes property of the estate and may be seized.
- Don’t use credit cards. Recent use of credit cards may be considered fraud and may have criminal consequences.
- Don’t transfer assets before bankruptcy. Your trustee may be able to reverse the transfer, and the asset will once again be your property.
- Don’t pay back friends and family while neglecting other creditors. Your trustee may be able to get that money back and redistribute it to all of your creditors.
Rebuilding Your Credit After Bankruptcy
Once your bankruptcy is successfully filed, you will be able to take steps to rebuild your credit. One of the best ways to do this is with vehicle financing following bankruptcy. Our team here at BankruptcyAutoFinancing.com will help you get back on the road to financial success.
Remember, we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.