Filing for Chapter 7 or Chapter 13 bankruptcy in Texas can be stressful. Unfortunately, many people make simple mistakes that can delay or even ruin their cases. Here are some common errors to avoid so you can move forward with confidence.
Choosing the wrong type of bankruptcy
One common mistake is not knowing the difference between Chapter 7 and 13. Chapter 7 wipes out many debts but could require selling non-exempt property, including vacation homes, stocks, jewelry and furniture. Chapter 13, on the other hand, allows you to keep assets and repay debts over time. Each chapter has pros and cons, so choosing the right one for your situation is essential.
Not taking advantage of Texas exemptions
Texas has strong exemption laws. For example, Texas has unlimited homestead exemption, which protects your primary home. However, you might make the mistake of cashing out your retirement savings to pay your debts before filing. Most retirement funds are safe during bankruptcy—so keep them where they are.
Leaving out assets or debts
You must declare everything you own and owe with the U.S. Bankruptcy Court when filing for bankruptcy. Be honest and thorough in your paperwork. Forgetting or hiding property—even by mistake—can have dire consequences. The court may dismiss your case or not discharge your debts.
Running up new debt before filing
Using credit cards or moving assets right before filing is risky. The court may treat these actions as fraud, and you could be stuck with the debt. Avoid added charges and do not transfer property once you plan to file.
Skipping required counseling
Before you file, you must complete a credit counseling course. After filing, you need a debtor education class to receive a discharge. These required courses are just part of the process. Forgetting these steps may lead the court to dismiss your case.
Bankruptcy gives you a fresh start to reset your finances. However, it is not something you should take lightly. Every step plays a critical role in the success of your case. One small mistake and you may lead to unwanted results like losing your assets. That is why you need to be careful to avoid these costly mistakes. Also, consider talking to a Texas bankruptcy lawyer to avoid any costly mistakes.
