Filing for bankruptcy can offer a powerful financial reset, but what you do before filing can seriously affect your case. At Arsenal Law, we help Arizona clients avoid common pitfalls that could delay or even derail their bankruptcy filing. Here are the top 10 mistakes to avoid if you're considering Chapter 7 or Chapter 13 bankruptcy.
If you use credit cards, take out loans, or finance major purchases right before filing, the court may view this as fraud. Debts incurred without the intent to repay can be challenged by creditors and excluded from your discharge.
Giving away assets or selling them for less than fair value can be seen as an attempt to hide property from creditors. The court may undo the transfer—or worse, deny your bankruptcy case altogether.
You may want to pay back loans from loved ones before filing, but doing so can be considered a "preferential payment." The bankruptcy trustee may claw that money back and redistribute it to other creditors.
Retirement accounts like IRAs and 401(k)s are usually protected in bankruptcy. Don’t drain them to pay debts that could be discharged. You’re risking your future security for little to no benefit.
Bankruptcy requires complete transparency. Leaving out property, income, or debts (even by accident) can lead to serious consequences, including dismissal of your case or criminal penalties.
Just like with friends or family, repaying a large amount to a single creditor shortly before filing may trigger a clawback by the trustee and raise fairness concerns in your case.
Timing is everything. Waiting too long—or filing too soon—can affect whether certain debts are dischargeable or whether you qualify for Chapter 7. Our office helps you choose the ideal time to file.
Don't assume bankruptcy will automatically fix everything. If you’re being sued or garnished, speak to an attorney immediately. You may need to act fast to stop a judgment or recover garnished funds.
Once you know you are going to file bankruptcy, any payments toward unsecured debts are like throwing money away. The debt is going to be eliminated in the new future anyway, so there is no point to paying it down a little bit more when that money could be used more effectively toward paying legal fees for your bankruptcy. Certain secured debts might be a waste of money also if you do not intend to keep the property that is being secured by the debt.
Many people wait until they’re facing wage garnishment, foreclosure, or repossession before calling a lawyer. At Arsenal Law, we have had many relieved clients whose only regret was not starting sooner. Bankruptcy is most effective when used proactively—not as a last resort.
At Arsenal Law, we guide you through the bankruptcy process from day one—avoiding costly mistakes and maximizing your fresh start. We'll help you prepare, review, and strategize to make sure you avoid costly mistakes.
Take Control of Your Financial Future
If you're struggling with debt in Arizona, don’t wait. Contact Arsenal Law to schedule a free consultation and find out if bankruptcy is the right solution for you.
Call 480-582-5228 or book online at www.ArsenalLawAZ.com
