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5 common mistakes to avoid when you are facing bankruptcy

There are many reasons for someone to consider bankruptcy protection. If you have decided to file, you will want to do everything correctly and in a timely manner.

Here are five mistakes to avoid when you are preparing to clear the way for a debt-free future.

1. Indulging in a spending spree

You may not think going on one last spending spree will matter if you are about to file bankruptcy. However, if a large purchase appears on your credit card just before filing, it may not be dischargeable. Your wisest course of action is to discontinue the use of your credit cards altogether.

2. Making payments to family

You may wish to repay a loan to a family member so it does not show up in the bankruptcy proceeding. However, your bankruptcy trustee could regard such payment as preferential in nature and disallow it. If this happens, your family member may have to take that repayment and turn it over to the trustee.

3. Hiding assets

Do not transfer funds to a friend or relative for safekeeping when you are about to file bankruptcy. Do not fail to account for an extra bank account you may have. In other words, do not hide any assets; it is illegal to do so. You could face a fine or even go to prison for bankruptcy fraud.

4. Failing to list all creditors

Be diligent in listing all your creditors, including any you would prefer to keep outside your bankruptcy proceeding. If you should omit one from your list, the trustee may not discharge the debt owed to that creditor.

5. Delaying your filing

Finally, once you have made the decision to file for bankruptcy, do not put it off. If you delay, your burden of debt will only grow. Explore your options to determine which form of bankruptcy is best suited to your needs and begin your journey to financial independence.

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