Bankruptcy mistakes cannot be erased
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Are you a North Carolina consumer wallowing in debt? Are you getting collection calls at work, at home and on your cell? Do you lie awake at night worrying about money? Bankruptcy can, in many cases, put an end to this type of money stress, but you’ll get the best debt relief if you avoid these common pitfalls in the first place. Check out these five common mistakes we see with North Carolina bankruptcies and learn how to avoid them.
#1 Leaving creditors off the list of those you owe
Some people leave creditors off their bankruptcy petition because they want to pay certain debts in full. In some cases, some debts are excluded out of error. Either way, it’s a mistake. Every creditor should be included on your North Carolina bankruptcy petition as you can’t treat one differently than another. If you owe your parents or a friend a debt, that should also be included. To make sure you include everything, go through all your bills and also pull all three versions of your credit report.
#2 Taking on new debt before you file
If you accumulate new debt right before you file bankruptcy, you can be accused of bankruptcy fraud. In particular, if you purchase luxury items in the months leading up to bankruptcy, or take out sizable cash advances on your credit cards, it can be considered a red flag for fraud and can cause creditors to protest your bankruptcy petition. Some people will max out their cards unintentionally before they file bankruptcy, but if you plan to file, you definitely should not be running up debt intending to ditch it.
#3 Paying off debt or moving assets around
Just as you shouldn’t take out new debt right before you file bankruptcy, you also shouldn’t pay off debt immediately before filing. For example, if you want to pay off a loan to your parents or a medical bill to your primary care doctor to stay in their good graces, this can be seen as a “preferential payment.” The bankruptcy court can demand that the person you paid back hand the money over to the court to be distributed fairly to your other creditors. This can make everything worse—don’t do it.
#4 Tapping into retirement funds to pay debt
Your retirement funds should be considered off-limits for anything but your retirement. Don’t tap into your 401(k) or other retirement savings to pay off credit cards, medical bills, etc. You lose so much when your drain your retirement account—not only do you lose on the present balance, but also on the future interest earnings capabilities. Most retirement accounts are shielded when you file North Carolina bankruptcy, so you can unload debt and still retain your retirement savings for your future.
#5 Waiting too long to file bankruptcy
The best results from North Carolina bankruptcy come with careful timing. Filing too soon can mean you won’t get the most complete debt relief. Filing too late may mean that some consequences of debt are irreversible. For instance, if you’re sued by creditors and they obtain a judgment and then a lien on one of your assets, the lien can be tough to remove even if the underlying debt is discharged in the North Carolina bankruptcy filing. Timing is everything—a talk with a bankruptcy attorney can help guide you.
To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt today for a free consultation. Call +1-919-646-2654 now for a free, no-obligation NC bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.