People who are considering filing for bankruptcy often think about what they need to do to prepare for their case, such as gathering their bills, collecting paystubs, and consulting a Licensed Insolvency Trustee like Welker & Associates.
There are also several things you should definitely not do if you’re thinking about bankruptcy. To ensure your case goes smoothly, avoid making these five mistakes.
1.Paying off your creditors. The whole point of filing for bankruptcy is to get some or all of your debt dismissed. Certain unsecured debts like credit cards, student loans (if out of school for seven years), and other types of personal loans can be discharged in bankruptcy. If you decide to file for bankruptcy, you will create a new payment plan for your debts that is more affordable.
2. Maxing out your credit cards. It may be tempting to go on a shopping spree before filing for bankruptcy, knowing that your credit cards bills will likely get discharged. But the court reviews all of your financial documents, and an uptick in spending right before your file date will be difficult to miss. You might find that these bills do not get discharged, which means you’ll still be on the hook to pay them.
3. Cashing out your retirement savings. Using your RRSPs to pay off some of your debt can be a risky move. It can leave you with zero savings for the future. Also, keep in mind that RRSPs are exempt from seizure by creditors. So keep your money in your RRSPs.
4. Transferring your assets. If you’re worried you may lose your house, your car, or some other asset, you may decide to transfer it to another person to “hide” it from your bankruptcy. But remember the court will investigate every one of your financial documents for the past several years, and they will notice if your house is suddenly owned by your best friend.
5. Using a Middle-Man. It’s not uncommon for people to use a credit counselor or a “Middle-Man” to try and file bankruptcy for them. The reality is that most of these supposed credit counsellors who promise to help you are really just taking advantage of your difficult situation and preying on your fears. I have seen cases where people have paid significant amounts of money to a credit counsellor without receiving any relief from the harassing collection calls and threatening letters. In most cases these individuals, after having paid money to the credit counsellor, end up having to meet with a licensed trustee in bankruptcy.
If you’re considering bankruptcy, the first thing you should do is call a licensed insolvency trustee. The licensed insolvency trustees at Welker & Associates are available to talk about your situation and help you make the best decisions to eliminate your financial burden.