2 common mistakes to avoid when filing for Chapter 7 bankruptcy

On Behalf of | Aug 8, 2023 | Chapter 7

Navigating the bankruptcy system can be complex, and even minor mistakes can have significant consequences. But the reality of filing for Chapter 7 bankruptcy doesn’t take away from the fact that it can provide much-needed relief for individuals overwhelmed by debt in Indiana.

And thankfully, all you need is a guide that walks you through the process of filing for Chapter 7 bankruptcy so you get it right on your first try. Keep it here to discover two common mistakes you should avoid to help ensure a smoother and more successful bankruptcy filing.

Failing to complete mandatory credit counseling

Before filing for Chapter 7 bankruptcy, individuals are required to undergo credit counseling from a court-approved agency 180 days before filing the bankruptcy petition. 

This counseling is designed to assess your financial situation and explore alternative solutions to bankruptcy, such as debt consolidation or negotiation with creditors. During counseling, you’ll receive valuable budgeting advice and financial management skills to help you avoid similar financial challenges in the future.

Transferring assets prior to filing

Asset transfers made two years before filing for Chapter 7 bankruptcy can also create complications. To begin with, your bankruptcy trustee can take back the assets and distribute them to your creditors. 

Additionally, transferring assets to family members or friends or selling them for less than they are worth may be seen as an attempt to shield those assets from creditors. The bankruptcy court can scrutinize these transfers and deem them fraudulent, denying your bankruptcy discharge.

Filing for Chapter 7 bankruptcy can provide a new beginning for individuals struggling with overwhelming debt. To help ensure a successful bankruptcy filing, avoid the common mistakes discussed in this guide.