Image: Couple considering filing for bankruptcy © Image Source, Getty Images

Many people find themselves in financial turmoil and finally decide that enough is enough; it's time to file for bankruptcy. The goal is for a fresh start from the monthly burden of trying to pay bills when there is not enough income to do so.

Bankruptcy happens. When it happens to you, try to avoid the following 12 common mistakes:

1. Lying

The vast majority of people who file for bankruptcy protection do qualify. Those who don't will generally have other options available to them. Deciding to file anyway -- despite not qualifying -- by leaving out assets or income could result in the case being dismissed and the filer being barred from filing on those particular debts ever again.

2. Leaving out income

People think that a second, part-time job does not count as income. All household income must be included, even the $300 per month your son earns working part time while in school. If you claim him as a dependent in your bankruptcy, you must include his income.

3. Leaving out cars

Some people say, "I don't want to lose my car. Why are you listing it in the paperwork?" The car is an asset (or a liability if it is secured by a loan). It must be listed, and the court-appointed trustee reviewing your case must know about every car you own. Even a car driven by your son, which wasn't transferred into his name, must be listed. And don't transfer it to him just before filing. That's the best way to lose it.

4. Leaving out car loans

You must notify all your creditors, even car lenders, that you have filed bankruptcy. You can usually keep the car, but the lender may have specific requirements you must follow. Failure to notify the lender may result in the loss of the car.

5. Leaving out creditors

Most credit card companies centralize the processing of credit card payments and services. Card companies will know that you filed for bankruptcy protection even if you don't have a balance on that particular card. So don't try to hide a credit card when you file for bankruptcy. You can get new credit after the bankruptcy. It is not worth it to leave out any creditor.

There is one big exception to this rule, and it pertains to credit unions. You may be able to keep an account with a credit union after filing for bankruptcy. Discuss this option with the credit union before filing.

6. Transferring assets out of your name before filing

Transferring an asset before filing for the purpose of protecting that asset is illegal. Just because you have an asset you want to protect does not mean you can give it away. A competent bankruptcy attorney can discuss how to legally protect an asset that might otherwise be at risk.

7. Repaying family before filing

You may owe your mother $10,000 and have every intention of paying her back. Just don't pay her back in the 12 months before you file. No matter what you think, she is still a creditor, like your department store or the bank that issued your credit card. The bankruptcy code looks harshly on payments made to family members before a filing. Know the rules concerning payment to creditors before filing your case.

8. Failing to list all potential or pending lawsuits you have against anyone

Suing your former employer for unpaid wages? Suing your former best friend for unpaid rent? Those are assets and must be listed as such in your bankruptcy paperwork. You may be able to continue with the case, but the court-appointed trustee must know about those claims or potential claims.

You may even lose the right to continue with a potential lawsuit because the court-appointed trustee might be interested in taking over your lawsuit on your behalf. The lawsuit becomes an asset in your bankruptcy case and may have significant value. This is a complicated topic, but failing to list potential or pending lawsuits is a common mistake made by bankruptcy filers.

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