Chapter 7 may be the most direct way out of excessive debt, but that doesn’t mean it can work for everyone. Every debtor is different, and one never knows when something will come up and complicate the filing. Often, even cases that seem straightforward can run into snags that delay, complicate, and even jeopardize the debtor’s recovery. That’s why it’s important to prepare for the worst. But what can go wrong during your filing, and how can you protect yourself from them? This guide shows a few examples of Chapter 7 bankruptcy problems and how they can be avoided.
New Assets And Liabilities
People seldom look into their total assets and liabilities until they have to-in this case, when they file for Chapter 7 protection. When gathering your bank statements and other documents, you may find information that you’ve all but forgotten over the years, but that will greatly affect your filing. It can be a property or trust fund you’ve inherited, or old debts to credit card companies from ten years back. Every single item has to be taken into account. Otherwise, you end up submitting inaccurate information and may get into even more trouble with the bankruptcy court.
During a Chapter 7 filing, creditors can come out of nowhere and take action against you. These are usually unsecured creditors, such as credit card companies, who want to stop the filing because it can discharge the whole debt and leave them with no compensation. They may even try to sue you even while you are under bankruptcy protection. While you can easily address their claims with the right paperwork, such actions can throw your debt relief plan off course. They even cause your case to be dismissed, or at least cost you hundreds of dollars more as your lawyer tries to sort things out.
Changes In Financial Status
Chapter 7 bankruptcy can take three to five months to complete, sometimes even longer. A lot can happen during that time-you can lose your job or get a new one, lose or acquire property, or find that you have other debt relief options. You may also find that you qualify for a different type of bankruptcy, and Filing chapter 7 in your circumstances may be considered abusive. In any case, the law requires you to report such changes to the court so that the proceedings can be adapted accordingly.