If you are planning to file bankruptcy in New York, there are a few things you’ll want to know about the process before you begin. Bankruptcy is a complex process that typically takes around three to four months to complete. Although you can file bankruptcy on your own, it’s highly recommended that you hire an experienced bankruptcy attorney in NY. This way, you can avoid long-term financial and legal outcomes that could affect you down the line.
Here are some of the biggest mistakes we’ve seen over the years and the best ways to avoid them.
Mistake 1: Choosing the Wrong Type of Bankruptcy
You can file under several types of bankruptcy, with Chapter 7 and Chapter 13 being the most common for individuals. However, these two types of bankruptcy are very different from one another.
Under Chapter 7, your nonexempt assets are liquidated, and those funds are used to pay your creditors. Under Chapter 13, you will be put on a payment plan with the expectation of paying back a portion of your debts after three to five years.
A qualified bankruptcy lawyer in NY will discuss both types of bankruptcy with you and help you determine the best one to file.
Mistake 2: Adding to Your Credit Card Debt
The 75-day period before filing bankruptcy is called the “presumption of abuse” period. If any major purchases are made during this time, the creditors can file a lawsuit against you. If you lose, you’ll have to pay back the money.
The reason why there’s this period is because you are making the conscious decision to buy something you can’t afford. To prevent people from racking up a bunch of debt and then turning around to file bankruptcy, the presumption of abuse period exists.
If you need to make a large purchase, don’t use a credit card or cash advance.
Mistake 3: Transferring Property to Someone Else
In Chapter 7, your nonexempt assets are subject to liquidation. This way, the courts can sell these assets and use the money to pay back your creditors. However, most people don’t like the idea of potentially having to sell their things, so they’ll try to transfer them to someone else.
However, this can have dire consequences. The trustee can actually sue you if they find out that you transferred property to someone else to avoid having it liquidated. This is fraudulent behavior that you’ll want to avoid at all costs.
Mistake 4: Hiding Some of Your Assets
Another thing you’ll want to avoid is hiding your assets. It’s tempting to casually forget to mention an extra bank account, but failing to be honest and upfront about your financial situation can cause your case to be dismissed. Furthermore, you can face fines and a prison term for bankruptcy fraud.
So, which assets do you have to share in bankruptcy? The three types of assets that matter in bankruptcy cases are:
- Personal property. This type of property is considered material goods and includes clothing, furniture, jewelry, artwork and vehicles.
- Real property. Real property includes land and improvements or buildings tied to land like a house or barn
- Intangible property. Intangible assets have value, but are not physically present. Examples include child support, alimony and retirement savings.
Mistake 5: Not Listing All of Your Debts
You are required by law to include all of your creditors and debts in your bankruptcy filing. Whether intentional or not, some people forget to add some of their creditors to their filing. Leaving out a certain creditor can cause your case to be dismissed, or the debt you owe to that particular creditor may not be discharged.
It’s also important to point out that all creditors must be treated equally. If you pay one creditor over the other, even if it’s a family member or friend, this is showing preferential treatment.
Mistake 6: Waiting Too Long to File
Debt often has a snowball effect. It starts small, say, with one or two credit cards. But it can quickly spiral out of control where delinquent bills pile up, wages are garnished and/or you have collections calling you nonstop.
As soon as you realize that you can’t pay your debts, get in touch with a bankruptcy lawyer. Having time is important because you can review your options and determine the best path forward. Plus, you can prevent lots of headache and unnecessary debt by filing early.
Speak with a Qualified Bankruptcy Lawyer in New York
The Law Office of William Waldner can help you start fresh! We are one of New York’s most trusted bankruptcy attorneys, and we are dedicated to helping our clients recover from debt and rebuild their lives. Schedule your free consultation to learn more about bankruptcy and how it can benefit you.