Financial hardship can strike when you least expect it. One moment your finances are in line and the next, you are dealing with a medical debt that you never saw coming.
If you find yourself grappling with personal debts that you cannot seem to pay off, you may consider filing for bankruptcy. Handled right, bankruptcy can provide the relief you badly need to get your finances back on track again. Handled improperly, on the other hand, bankruptcy can worsen an already difficult situation.
Here are three costly mistakes you want to steer clear of if you decide to declare bankruptcy.
Taking too long to make up your mind
Bankruptcy is a big deal. As such, you should never rush to file. If you are caught up in debt, and you do not seem to have a clear payment plan, it is important that you explore your options. These may include seeking debt cancellation or renegotiating a workable repayment plan. If these are out of the question, then you are better off beginning your bankruptcy journey. Do not procrastinate bankruptcy if it is inevitable. This will only drain your finances further.
Failing to declare all your assets
The importance of honesty when declaring bankruptcy cannot be overstated. While filing for personal bankruptcy, you will be expected to disclose all your assets and debts. If you do not, you might be accused of bankruptcy fraud. Besides hurting your chances of getting a discharge, this can also lead to criminal charges. Be as forthright as possible when declaring your assets.
Choosing the wrong type
There are two types of personal bankruptcies – Chapter 7 and Chapter 13 bankruptcies. It is important that you understand the difference between the two and file the right bankruptcy. If you are dealing with unsecured debts like medical bills, credit card debts or personal loans, then Chapter 7 bankruptcy could be ideal for you. If, however, you are dealing with secured debts, then Chapter 13 may be your best option.
Bankruptcy can provide financial breathing space if you are struggling to pay off your debt. Understanding your obligations can help you protect your interests and avoid costly missteps while declaring bankruptcy.