1. Waiting Too Long To File Bankruptcy.
It makes no sense to bury your head in the sand and hope your debt will go away. It won't. And it makes less sense to deplete assets such as a 401k to fight a losing battle because inevitably assets are depleted - creditors win - you lose - and then creditors obtain judgments and seize your remaining property.
2. Settling A Debt for Less Than the Amount Owed.
Why swap out a credit card debt for an IRS debt? What creditors and debt settlement firms don't tell people is that more often than not the deficiency balance (the difference between the amount owed and the amount settled) is usually charged off and THEN a Form 1099 is sent to the IRS who levies taxes owed against it because it's considered taxable income.
3. Getting a Line of Credit or Second Mortgage.
It makes no sense to consolidate unsecured debt such as credit card debt by putting a second mortgage against your home. Why risk your home? It makes even less sense to get a second mortgage to satisfy in item on your "wish list" such as a remodeled kitchen or bathroom.
4. Depleting an IRA, 401K, etc. to Pay Creditors.
Why give away your assets to fight a losing battle? IRA and 401k accounts are protected under Title XV, Chapter 22 of Florida Statutes.
5. Reaffirming a Debt You Can't Afford.
It makes no sense to reaffirm a debt such as a vehicle that you can't afford. Eventually the debt will go into default and you'll be right back where you started.
6. Failing to List All Debts In Your Bankruptcy.
Debts not listed on your bankruptcy petition cannot be discharged. Therefore all creditors should be listed including debts owed to friends & family members.
7. Using Your Credit Cards Within 90 Days of Filing.
This includes cash advances, balance transfers, and purchases. Why jeopardize having a debt not be discharged as a creditor or your trustee may file an objection to prevent the debt from being discharged.
8. Paying Back Loans to Family Members Before Filing.
Repaying loans to family members or business partners within one year of filing should be avoided at all costs. The consequences can be enormous.
9. Hiding Assets from the Court.
You will be caught and you should be caught because it's wrong. Transferring your property (such as a vehicle) to someone else in anticipation of filing bankruptcy will not protect the property either.
10. Not Being Honest with the Court.
The bankruptcy court expects you to be 100% honest and forthcoming about all assets, liabilities, income, expenses, etc. and so do we.