Potential Pitfalls When Filing Bankruptcy

The bankruptcy process is full of pitfalls, many of which are completely unknown or unanticipated to those without bankruptcy training. Most cases filed by individuals without the help of an experienced bankruptcy attorney fail to reach a successful conclusion. In this post I’d like to talk about a few of the less common (but still very important) requirements for successfully completing a bankruptcy case.

Educational Courses

First, the bankruptcy court has a strict requirement that each person who files a case must complete two educational courses.  The first of these is called a credit counseling course, and it must be completed before you even file your case (except in extraordinary circumstances).  The course is not difficult or particularly time consuming, and most attorneys can put you in touch with a credit counseling agency.  However, your case can be dismissed immediately if you file your case without having first completed this course.  The second course is a financial management course, and it must be completed before your case finishes.  If you fail to do so, the court will deny your discharge, which means you will have gone through the whole bankruptcy process and still not received any of the benefits.  Again, an experienced attorney will be able to get you in touch with an agency to help you complete this requirement.

File Your Taxes

Second, the bankruptcy code requires that you keep up with filing your regular federal income taxes each year.  In a chapter 7 case, which typically only lasts 3-4 months, this requirement usually doesn't come into play, but a chapter 13 case can last up to 5 years.  If you don’t file your income taxes as required, the IRS can have your case dismissed immediately.  A similar requirement applies to domestic and/or child support payments.  After filing a case, you must keep current with your required payments.  If you don’t, the court will not allow the case to go forward, and you’ll be dismissed.

Notify Your Attorney of Any Lawsuits

Last, it is very important that you disclose to the court any lawsuits you have against another party or any potential lawsuits or claims you may bring in the future.  The ability to file a claim is considered an asset. If you fail to list it in the schedule of assets you have in bankruptcy, you can be blocked from bringing the lawsuit in the future. The bankruptcy petition is a sworn statement submitted to the federal court system.  If you try to bring a lawsuit for something you failed to list on your bankruptcy, the opposing party can simply say that since you didn't disclose it to the court when you filed bankruptcy then you shouldn't be allowed to bring it up later, and you will lose all your rights to recover.

If you’re considering filing for bankruptcy relief, I urge you to speak with one of the experienced attorneys at any of our Bond & Botes affiliated offices.  We offer free initial consultations with attorneys who will discuss your situation and help you make the best decision possible while avoiding dangers and planning for the future.

 

Related Information

• Property Transfers Before Bankruptcy
• Winning the Lottery During Bankruptcy 
• Obtaining Credit Reports Before Bankruptcy