Pre-Bankruptcy Mistakes

When considering bankruptcy, some people tend to certain things, innocently and intentionally, which may affect their bankruptcy case. These actions may take place even when they have no plans to file for several months. Consulting with a qualified bankruptcy attorney before and during bankruptcy will help ensure that a bankruptcy case proceeds smoothly and will go unchallenged by the trustee and creditors. The following is a short list of some things not to do before filing bankruptcy.

Incur More Debt

This is commonly done by many people when they are in the process of planning to file bankruptcy. They buy more goods and services and use their credit card for payment within the months preceding the bankruptcy.

Consumer debt for luxury goods or services incurred within 90 days before filing of the petition, and totaling more than $725 to a single creditor or cash advances of $1,000 or more within 70 days before filing for bankruptcy is non-dischargeable under 11 U.S.C. § 727(b), and 11 U.S.C. § 523(a)(2)(C)(i)(I)]. These new threshold amounts are for bankruptcy cases filed on or after April 1, 2019.

Pre-Bankruptcy Mistakes

Transfer Property

Many who file bankruptcy, in an effort to eliminate the risk of losing assets, attempt to sell or transfer them to others, even entities owned by the debtor. Federal bankruptcy law considers these fraudulent transfers unless it is sold for fair market value and disclosed to the trustee in the bankruptcy case.

Increase Income

While it may seem like a good idea to secure or pay off some debts before filing for bankruptcy, these actions could make a person ineligible for bankruptcy. Because a debtor’s income is an important factor in determining eligibility for bankruptcy, getting a second job or increasing income in the six months prior to filing bankruptcy, even with good intentions, may cause more harm than good. The result may be that a debtor is required to file a Chapter 13 case instead of a Chapter 7 case, and therefore repay some debts with disposable income.

Pay Creditors

Many people innocently try to make sure certain parties get repaid before bankruptcy. By doing this, they are giving these creditors preferential treatment, which is a “preference” under the Bankruptcy Code, and illegal.

 
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