Common Mistakes To Avoid When Filing For Bankruptcy in Texas

 Posted on August 08, 2023 in Bankruptcy

Bankruptcy proceedings, often seen as a last resort during severe financial adversity for individuals and businesses, can paradoxically offer a lifeline and the opportunity for a fresh start if managed correctly. Here are eight common mistakes to avoid if you need to file for bankruptcy in Texas.

Dismissing Bankruptcy as a Potential Debt Management Solution

Bankruptcy can strike fear in many, given its stigma and possible repercussions on your credit record, deterring you from exploring this avenue. However, outright refusal to consider bankruptcy a potential solution could prolong your financial difficulties. Bankruptcy can allow the restructuring or even eliminate some debts, marking it as a feasible strategy in numerous scenarios.

Procrastinating and Hesitating

A recurring error is waiting too long or deferring the choice to file for bankruptcy. This often leads to people incurring late charges, penalties, and accrued interest, which compounds their financial plight. It is imperative to consult a legal expert promptly when your debts appear unmanageable to circumvent the problem's escalation.

Utilizing a Home Equity Loan to "Escape Debt"

While using a home equity loan to clear your debts may appear sensible, it may risk your most precious asset—your house. Failure to repay your home equity loan could cost you your house. Unsecured debts can be written off in bankruptcy, but secured debts like home equity loans generally still require repayment.

Tapping into Your Retirement Account to Settle Debt

In a frantic bid to tackle debt issues, some resort to their retirement savings, potentially causing severe future implications, derailing retirement plans, and potentially leading to tax liabilities and penalties. Bankruptcy regulations typically shield retirement savings, making it advisable to seek a bankruptcy lawyer's advice before taking such steps.

Neglecting to Enumerate All Creditors

During bankruptcy filings, it is crucial to include all creditors. Overlooking this might result in these debts not getting written off, leaving you responsible for them post-bankruptcy.

Incurring Debt Before Filing for Bankruptcy

Running up a significant debt or making major purchases just before filing for bankruptcy could be seen as deceptive. Such debts may not be discharged in your bankruptcy, which could lead to the case's dismissal.

Relocating Assets Before Filing for Bankruptcy

Some attempt to safeguard their assets by transferring them to acquaintances or family before filing for bankruptcy. This can be construed as an attempt to conceal assets and may be seen as fraudulent by the court, leading to severe penalties or dismissal of your bankruptcy filing.

Hiding Assets During Bankruptcy Filing

Lastly, disguising or failing to fully disclose your assets during bankruptcy filing can lead to grave consequences. Bankruptcy trustees wield extensive powers to retrieve concealed assets, and deliberate concealment could lead to criminal charges.

Contact a Texas Bankruptcy Attorney

When you're burdened by overwhelming debt, it is important to understand exactly what is involved in bankruptcy. An Arlington debt relief lawyer can help you assess your situation and provide guidance. Call Acker Warren P.C. at 817-752-9033 for a free consultation.

Sources:

https://www.texasbar.com/AM/Template.cfm?Section=Disaster_Resources_for_Attorneys&Template=/CM/ContentDisplay.cfm&ContentID=42610

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics