Talking to a bankruptcy attorney can prevent costly mistakes

On behalf of James Monroe

Without legal guidance, people who are filing for bankruptcy can make costly errors that put them into a worse situation.

When people in Orlando find themselves in financial difficulty, the law gives them the chance to deal with their debt and creditors through bankruptcy. However, bankruptcy can be a complex process, especially if people have a lot of assets. One way to avoid making a costly mistake is for people to talk to an experienced bankruptcy attorney.

Choosing the right bankruptcy

A common mistake that people make is in deciding which bankruptcy protection to file for. The American Bar Association points out that Chapter 13 is intended for people who want to retain their assets and still pay their debt. People on this plan agree to make the arranged payments over a specified period of time. Some people, however, make the mistake in thinking that they can handle a repayment plan and this can cause additional problems when they find they can't.

Chapter 7 bankruptcy essentially cancels debt after the person's assets have been sold and the debtors have received some form of payment. An attorney can help people examine their financial situation, evaluate the ratio of debt to income and assets, and provide guidance on which bankruptcy protection would be the best choice.

Asset disclosure

Part of the bankruptcy process requires people to provide the court with a full inventory of all assets. This includes real estate, sources of income, expensive art pieces, stocks, savings accounts and other items of monetary value. If people make a mistake in the disclosure of assets to the court, they could find themselves charged with committing bankruptcy fraud.

Cornell University Law School's Legal Information Institute states that if family members, business associates or friends are the recipients of property belonging to the debtor, the debtor may have committed a crime. Concealing assets is the cause of 70 percent of bankruptcy fraud charges. People can protect themselves from such allegations by enlisting the help of an attorney who can identify what items are not exempt from bankruptcy, and assemble a full and complete list of assets.

Emptying retirement accounts

If people have a retirement account, they may think that they have to use the money in that account to pay their bills before they can file for bankruptcy. However, doing so can leave them in a worse financial situation, especially if they are close to retirement.

An experienced bankruptcy attorney will tell people that most retirement accounts are considered exempt in bankruptcy proceedings. This is true whether the person is filing for Chapter 7 or for Chapter 13. Additionally, taking money out of these accounts before reaching retirement age can leave people facing taxes and fines for early withdrawal.

Before people in Florida make any decisions concerning bankruptcy or debt management, they may find it beneficial to sit down and talk with an attorney.