Chapter 7 bankruptcy is helpful if you cannot get out of debt. However, it is not a foolproof solution. There are many mistakes you need to avoid if you decide Chapter 7 is right for you.
According to the United States Courts, 335,886 people filed for Chapter 7 in 2021. If you believe Chapter 7 is the right choice, avoid the mistakes described below.
Do not transfer assets
You cannot change the title on your assets before filing for bankruptcy. Doing so puts you in danger of bankruptcy fraud. Before you file, do not change the title on your car, bank accounts, home or business venture. Chapter 7 does not necessarily mean you will lose all your assets, and committing fraud will not help your situation.
Do not use credit cards
Stop using your credit cards before filing for Chapter 7. If you can, use debit cards and cash only. Creditors might object to a debt discharge if they notice you bought a new watch before filing. You can use a credit card to purchase essential items.
Do not make preferential payments
If you can continue paying regular bills, you should do so. However, you should not pay preferential treatment to specific debtors. Even if you have good intentions, bankruptcy laws prohibit preferential transfers. A lender might sue you for the money back if they discover you paid someone else off before the lender received a payment.
Filing for bankruptcy is a stressful prospect. Once you make that decision, do not make things worse by committing the abovementioned mistakes. Stay on top of your credit usage, and let the courts handle the rest.