Four Things Not To Do Before Declaring Bankruptcy

13 August 2015
 Categories: Law, Blog

If you plan to declare bankruptcy in the next few months, there are certain financial moves that you should think twice before doing. While bad financial decisions could lead to bankruptcy, these bad moves could prevent you from getting the debt relief provided by a successful bankruptcy. Most of the four following items involve not so much the act itself, but the timing. Pay special attention the four following things not to do before you file for bankruptcy.

1.  Frivolous Luxury Spending

Your recent credit card use could come under close scrutiny if you charged certain unneeded items in the period leading up to your filing. To be specific, charges of more than $650.00 within 90 days of filing. If you can show that the items charged were necessary, the creditor's may withdraw their objection. For instance, charging a car repair so that you can get to work or get your children to school is an allowable use, charging a $2000.00 window tinting job would likely be considered a luxury expense, and disallowed.

2.  Cash From A Credit Card

Taking a cash advance from a credit card will also draw attention from your creditors and the bankruptcy trustee, and possibly trigger a disallowance. Since cash use is difficult to trace, don't withdraw more than $925.00 in total in the 70 days prior to filing. This amount is not per card, it's $925.00 in total.

3.  Playing Favorites

From the bankruptcy trustee's prospective, the process of bankruptcy includes a fair distribution of any available assets. Ensure that you don't pay more than $600.00 of a debt to any one creditor in the 90 days before you file. The term creditor here could mean any credit card, bank, business associate, relative or friend. Doing so could cause a "take back", enabling the bankruptcy courts to create a more equitable distribution of debt.

4.  Property Transactions

If the bankruptcy court suspects you of intentionally hiding assets, you may be liable for criminal charges. Each state has specific rules about the amount and length of time allowed between the giving or selling of assets before bankruptcy filing. The court is particularly interested in property that appears to have been sold at below-market value.

Many of the above situations have state-specific rules, so consult with your bankruptcy lawyer to avoid running afoul of the laws of your state. With your attorney's advice, you may need to delay your filing for a few months in order to comply with good pre-bankruptcy behavior. Get an experienced bankruptcy professional to help you get your debts forgiven in an ethical and legal manner, and get started on your fresh financial future.

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