Bankruptcy is a regulatory procedure that allows you to clear your debt problems and start again. The procedure can preclude legal action being taken against you, as well as creditors pressuring you for repayment.
However, bankruptcy is a legal procedure, and any actions you took prior to filing will be scrutinized. Before filing for bankruptcy, there are a few things you should never do. Some of these errors may be considered offences under the Bankruptcy and Insolvency Act, jeopardizing your chance to receive a bankruptcy discharge. Others are simply not financially viable.
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What mistakes to avoid before filing for bankruptcy?
There are a few things you need to avoid doing prior to filing a bankruptcy to protect your interests.
Don’t use all of your credit cards at once.
If you used your credit cards or lines of credit for any purchases or cash advances three months before filing, your trustee will ask this question as part of their evaluation. Using your card for everyday purchases, such as groceries, is unlikely to be a problem. However, maxing out your credit cards just before filing can be an issue if you don’t intend to pay them back.
Before filing, avoid taking out new loans
It’s fairly uncommon for someone who is behind on their payments to contemplate taking out a new loan before filing for bankruptcy in order to stay afloat. Your trustee, on the other hand, will inquire as to whether you applied for and obtained any new loans or credit in the days leading up to your bankruptcy filing. Borrowing money that you know you won’t be able to return or that you’ll be forgiven if you declare bankruptcy could be considered fraud.
Don’t hide any assets, income, or debts.
Bankruptcy is a legal process, and you must present the trustee with accurate facts. A Statement of Affairs, which is basically a summary of the goods you own, who you owe money to, and your monthly budget, is one of the bankruptcy paperwork you will sign. You are signing this statement under oath, and if you lie, you will be charged with perjury. Your bankruptcy petition is filed with the bankruptcy court, and a copy is provided to your creditors.
Don’t ignore collecting attempts.
Filing for bankruptcy protects you from creditor harassment. While you may have been receiving collection calls for several months, your creditors may soon take legal action against you and obtain an order garnishing your salary or freezing your bank account.
While bankruptcy can prevent collection activities such as wage garnishment, it will not prevent secured creditors from repossessing your car or foreclosing on your home if you fall behind on your payments. However, declaring bankruptcy sooner can improve your cash flow, allowing you to keep up with your auto or mortgage payments and avoid these actions.
It might be difficult to know where to turn for help when it comes to dealing with your obligations, learning more about bankruptcy, and exploring your alternatives. Send us an email to [email protected], to discuss your situation like Debt consolidation loans, debt repayment process, debt settlements, consumer proposals. Your counsellor will offer you advice and information so that you may make an informed decision about what is best for you.
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