If you are having a hard time paying your bills, it is important to understand that there are many others going through a similar situation. Indeed, people consistently cite debt and other financial problems as a top source of stress. The American Bankruptcy Institute (ABI) reports that 9,977 bankruptcy petitions were filed in 2021. Nearly 75 percent were Chapter 7 bankruptcy filings.
Bankruptcy provides a potential path back to financial stability. That being said, the process can be difficult to navigate. There are pitfalls to be aware of and common pre-bankruptcy errors that you need to avoid. In this article, our New Jersey bankruptcy attorney highlights five of the most common mistakes that you need to avoid before filing for personal bankruptcy protection.
Watch Out for these Common Bankruptcy Mistakes
- Waiting Too Long to Start the Bankruptcy Process
Filing for bankruptcy protection at the right time can make a big difference. Waiting too long to start the bankruptcy process is the single most common pre-bankruptcy mistake that people make. Of course, that is not to say that you need to file for personal bankruptcy simply because you fell a few months behind on your credit card bill. Still, debt is not going to go away on its own. When you begin falling deeper and deeper into debt each month and you see no viable path out, it is time to set up a confidential appointment with a New Jersey bankruptcy attorney.
2. Choosing the Wrong Type of Bankruptcy Protection
When you start the bankruptcy process, it is important that you know which type of personal bankruptcy protection is right for your specific situation. Your two main options are as follows:
- Chapter 7 Bankruptcy: A liquidation bankruptcy through which people who satisfy the means-tested—and adjusted income below the state’s median—can discharge most of their unsecured debts.
- Chapter 13 Bankruptcy: A restructuring bankruptcy through which a petitioner can roll their debts into a two to five year (affordable) monthly payment. There is no means test for Chapter 13 bankruptcy.
A New Jersey personal bankruptcy lawyer can review your financial circumstances and help you weigh the advantages and disadvantages of each type of personal bankruptcy.
3. Making Below Fair Market Value Transfers (Giving Stuff Away)
You should not give your property and assets away to family members, friends, or other associates immediately before filing for bankruptcy. Any transfer that is considered to be “below fair market value” could be deemed a fraudulent conveyance. It is not a viable strategy to protect your property. The bankruptcy court could end up denying your petition and/or reversing the transfer.
Further, there is some good news: The majority of people who file for personal bankruptcy protection in New Jersey are eligible to retain most (or all) of their personal property through available exemptions. Do not assume that you are going to lose everything you own by filing for bankruptcy. That is simply not the case.
4. Racking Large Amounts of Additional Debt Immediately Prior to Filing
Once you have made the decision to file for bankruptcy protection, it is time to do whatever you can to stop incurring additional debt. Taking out a large amount of debt—such as maxing out a credit card or taking out a big personal loan—right before a bankruptcy filing could be deemed fraud. The bankruptcy court may not allow you to discharge debts that were incurred “in bad faith.” In some cases, it could even be deemed a criminal violation.
5. Opting for a Do-It-Yourself (DIY) Bankruptcy
Do-it-yourself (DIY) projects can be extremely rewarding. That being said, a DIY bankruptcy is almost invariably a big mistake. Whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, the legal process is complex. Professional guidance and support can help you navigate the system in the most efficient, cost-effective manner—thereby putting you in the best position to shed overly burdensome debt and rebuild your finances. Protect yourself by working with an experienced New Jersey bankruptcy attorney.
Get Help from a Bankruptcy Lawyer in New Jersey
At the Law Offices of Scott J. Goldstein LLC, our New Jersey personal bankruptcy attorney is an experienced advocate for clients. We are here to make sure that your bankruptcy filing is handled the right way. Give us a call today or send us a direct message to book a strictly confidential appointment. From our Denville office, we provide bankruptcy representation in North Jersey, including in Morris County, Essex County, Union County, and Hudson County.