Get out of debt
Bankruptcy: the red flags
The short answer
The filing is honest work. The people selling shortcuts around it often are not.
- Watch for "foreclosure rescue" or "we'll file for you" outfits that charge high fees and deliver little.
- A bankruptcy petition preparer can type your forms, but by law cannot give you legal advice.
- Certain moves before filing — running up cards, hiding assets, paying back one relative — can get your case dismissed or worse.
- The required counseling course has to come from a court-approved provider.
- The quickest way to lose money is a "rescue" company that takes a fee and files nothing.
The fine print that costs people money
Bankruptcy is a legal process built to give you a fresh start. Most of the harm around it comes from people selling a shortcut, or from a few pre-filing missteps. Check each one before you act.
- "Foreclosure rescue" scams. A company promises to stop foreclosure for a big upfront fee, sometimes by filing a bogus case in your name. You pay, the case gets tossed, and the foreclosure keeps moving.
- Petition preparers have limits. A non-lawyer can type your forms for a capped fee, but cannot advise you on the law. Treating one as your lawyer is how errors get into the file.
- Pre-filing mistakes matter. Large new charges, transferring assets, or repaying one creditor or relative before you file can be undone by the court. In some cases those moves can sink the whole case.
- Use court-approved course providers. The pre-filing counseling and the debtor-education course must come from a provider on the court's approved list. A cheaper course off the list does not count.
- Not all debt is dischargeable. Anyone promising to erase student loans or recent taxes through ordinary bankruptcy is overselling. Those debts usually survive.
⚠ The catch
If someone guarantees you a result or wants a large fee to "stop the bank," slow down. That promise is the warning sign, not the solution.
Talk to a real bankruptcy attorney or legal aid first. Our guide on whether you need a lawyer and the one on the required courses will tell you what the process actually asks of you — before anyone asks for money.