1. BANKRUPTCY STOPS DEBT COLLECTION Debt collectors, Law Firms, the IRS are all barred from trying to contact you and to collect the debt at the moment you file your Bankruptcy Petition. When the debt is discharged that safety net becomes permanent. Bankruptcy doesn’t stop certain government related proceedings and doesn’t discharge all debts.
2. LYING GETS YOU IN TROUBLE
The Court may dismiss your case or worse if you leave something out or lie on the documentation you file.
3. ANY TAX REFUNDS YOU ARE OWED WILL BE TAKEN
At least a portion of the tax refund you may be due for the year in which you file for bankruptcy and 100% of any previous year(s) that may be owed to you become “property” of the bankruptcy trustee for distribution to creditors.
4. BANKRUPTCY DOESN’T “CLEAR” YOUR CREDIT REPORT
The debt discharged in a bankruptcy should be shown in your credit report as “included” in bankruptcy or “discharged” in bankruptcy within months of the date your debts are discharged BUT bankruptcy doesn’t “clear” your credit report in the sense all the debt history disappears. Your bankruptcy filing stays on the credit report history for 10 years.
5. BANKRUPTCY CRIMES – YOU CAN GO TO JAIL
Many people lie on their bankruptcy schedules and get caught. Some of those spend up to 5 years in Prison. You can’t conceal property from the Trustee in bankruptcy, you can’t transfer property or conceal property to defraud creditors, and you can’t hide or destroy documents, or make a knowingly false statement. Just because you heard that someone else got away with it doesn’t mean you will.
6. YOU CAN’T EASILY GET OUT OF A CASE THAT YOU HAVE FILED IF YOU CHANGE YOUR MIND
You can’t just dismiss your chapter 7 bankruptcy without a Judge’s approval and that may be hard to obtain. You can dismiss your chapter 13 anytime.
7. TAX DEBT ISN’T DISCHARGEABLE UNLESS IT MEETS CERTAIN REQUIREMENTS
Just because you owe the IRS money and list the IRS properly in your bankruptcy schedules, you won’t necessarily get rid of your obligation. The tax debt has to meet certain date criteria and be of a certain type of tax to be discharged in the bankruptcy.
8. BANKRUPTCY FILING DOESN’T MEAN YOU DON’T HAVE TO PAY FOR YOUR HOUSE OR CAR
If you want to keep an asset that is acting as security for a loan, at a minimum, you have to keep making the payment regularly even if the bank stops sending statements to you.
9. ALL INCOME, BUDGET, DEBTS, ASSETS AND FINANCIAL HISTORY HAVE TO BE LISTED
You don’t get to pick and choose what you tell the court. The bankruptcy code and rules determine how your assets are treated, what happens to your debts, and whether you qualify to file based on your income and budget.
10. TRY NOT TO INCUR NEW DEBT BEFORE FILING
It is a bad thing if you take trip to Cancun a few weeks before filing and use a credit card to pay for it. It is worse if you do it without the intent to repay. Taking on debt prior to filing should be avoided in most cases.