Bankruptcy is a legal process that enables consumers to get rid of their debt and start fresh through the court system. Depending on the type of bankruptcy filed, some consumers will have to make monthly payments to the bankruptcy court over a specified period of time, while others will have their debts dissolved.
There are several things that filers should do and some they shouldn’t do during the bankruptcy process. Here is what you need to know.
Do: Learn your responsibilities
All bankruptcy filers have specific responsibilities. These include taking part in credit counseling and classes so that you can learn how to make responsible financial decisions moving forward.
Don’t: Spend frivolously right before bankruptcy
Don’t make frivolous purchases within the 90 days prior to filing bankruptcy. This includes making luxury purchases, as the court may view you as irresponsible as a result.
Do: Include all debts
You shouldn’t pick and choose what debts to include in your bankruptcy filing. Instead, you should include all the debts you are responsible for so that you can benefit from the fullest level of protection under the Bankruptcy Code.
Don’t: Try to obtain new credit
Don’t take out loans or obtain new lines of credit in the 90 days before filing. It is possible that the creditor could seek to have the debt removed from the bankruptcy, which would result in you having to pay the debt in full.
Do: Fill out all paperwork completely
If you omit certain information or do not provide a full accounting of your situation, the strength of your case could be compromised and/or your discharge could be delayed.
Don’t: Assume student loans are out of the question
Some people think that their student loans can’t be addressed through bankruptcy. In the past, it was much more difficult than it is now to have them discharged. The Biden administration recently made changes to laws that create a consistent process for discharging student loans.
Filing bankruptcy is often a responsible way to take control of your debt. Making sure that you understand everything about the process can help to keep it low stress. Consider working with a legal professional who is familiar with these matters so they can help walk you through the process and take much of the heavy lifting off your shoulders.