Filing for bankruptcy can be a tedious process.
Besides the numerous requirements and steps involved, debtors must take extra precaution to follow the many specific rules.
Bankruptcy laws are very specific about how the process is to be managed and what is required of each filer, which is why accuracy and honest is of utmost importance.
Anyone considering filing for bankruptcy should take extra precaution to avoid certain mistakes that could result in a dismissal of the case or even fraud.
Assets The bankruptcy court uses a list of the debtor's assets to evaluate their degree of financial insolvency.
Many people fear losing assets to creditors in bankruptcy and may make some big mistakes when it comes to managing assets.
Lying or withholding information about assets in bankruptcy can be problematic.
Whether intentional or accidental, not providing a fully accurate list of all assets to the court may be viewed as suspicious or fraudulent.
In some cases, people may give away their assets to friends or family members prior to filing their case with the intent of hiding that asset and getting it back after the case is complete.
This can be a costly mistake.
Bankruptcy laws do allow debtors to sell their assets prior to filing for bankruptcy, but (1) the asset must be sold for fair market value and (2) the income from the sale must be reported to the court.
Any deviations of these guidelines or rules can be extremely problematic in a bankruptcy case and lead to charges of fraud.
Debts On the other hand, debts are also very important in a bankruptcy case.
Lying about debts or not including all creditors in the petition is prohibited.
Although the court may not include all of the debts in the debt discharge, it is required that all creditors both past and present be included in the details.
If there is any change to debts or the list of creditors, filers must inform the court right away to avoid any suspicions of fraud.
Income A debtors income is another important factor in determining the financial insolvency of the case.
While most people accurately list their income and bank account information, many people forget or leave out information about future income.
Payouts from investment accounts, pending payments on a prior claim and inheritance money are common examples of future income that must be included in the petition.
These are considered to be income even though the debtor has yet to take possession of the monies.
Any attempt to leave out or hide this information can be viewed as fraudulent.