Four Things Not To Do Before Declaring Bankruptcy


If some unfortunate financial issues have led you to consider filing for bankruptcy, you should understand that your actions prior to filing could impact your ability to have a timely and uneventful chapter 7 filing. If your financial plans include any of the four following transactions, you may need to delay filing for bankruptcy. Read on to learn more about these four things not to do before declaring bankruptcy.

1. Charging Luxury Items

Using credit cards to pay for items that are considered unnecessary within a certain period of time prior to filing could cause those creditors to take issue with your spending. Creditors are allowed to come forward at the creditor's meeting to challenge certain debts, and the bankruptcy judge (or trustee in some states) could disallow those charges. While it is permissible to continue to use your credit cards up to the filing date for your chapter 7 filing, you should ensure that any charges within 60 days prior to filling are absolutely necessary. For example, paying for a car repair so that your vehicle is available for going to work and taking your children to school would likely be allowed. Taking a vacation would likely not be allowed, and those charges could be exempt from your filing.

2. Taking Cash Advances

Just as in charging un-needed items on your credit card, taking out large cash advances prior to filing could run you afoul of creditors. The bankruptcy law allows you to take no more than $925.00 (total) in cash advances on a credit card or any combination of cards in the 70 day time period prior to filing. This rule applies regardless of the intended use of the cash.

3. Picking and Choosing Creditors

One of bankruptcy's purposes is to distribute your debt (and assets, if any) among creditors in a fair manner.

Paying more than $600.00 to any one creditor, business associate, friend or relative for any reason within the 90 day period prior to filing could cause the bankruptcy court to disallow the distribution and perform a "take back" of those funds. For example, you should not pay back a personal loan to your father within that time period.

4. Transference of Property

The bankruptcy courts are empowered to seize personal property, such as real estate, vehicles, art and jewelry, and sell them to help pay your creditors. Selling or giving away any property prior to filing for bankruptcy could be interpreted by the court as attempting to defraud by hiding assets. This is a serious criminal offense. Each state has their own specific rules about this issue, but the courts generally take a hard look at items sold at below market rate to determine fraud.

The above issues will cause delays in your bankruptcy proceedings and may even land you in jail. Consult with a bankruptcy attorney as soon as you suspect you will eventually file to get your affairs in order before you file. To learn more, contact someone like William C Fithian III.


13 January 2016

Getting Through Bankruptcy With Minimal Stress

Filing for bankruptcy has a tendency to make people feel ashamed and stressed out, and can turn into a big source of depression if not handled properly. As a counselor for couples and families, I have worked with various families throughout the years who have had to go through bankruptcy. And during this time, I have seen firsthand how, with the right mindset, going through bankruptcy can make people stronger in their financial lives and careers. I started this blog to provide information about the right things to do and the things that should be avoided while going through bankruptcy to minimize stress and maximize potential once the process is over. If you have any questions or concerns, hopefully they can be addressed on these pages.