If a chapter 7 bankruptcy is likely in your future, you may want to learn a bit about what not to do just before you file. Your financial situation, including your spending, may be subject to a certain "look back" period by the bankruptcy trustee. Read on and learn how to avoid getting yourself into trouble by violating the bankruptcy codes.
1. Don't go wild with your credit cards once you decide to file for a chapter 7 bankruptcy.
If you are tempted to take advantage of any available credit on your cards and do some shopping, be very careful. The creditors will take a look at your spending in the months (90 days to be exact) leading up to your filing, and they may raise an objection to your spending at your creditor's meeting. This means that certain charges won't be discharged by your bankruptcy.
That is not to say that you cannot use your cards, you can...as long as you obey the rules. You probably have been depending on those cards to get you through some tough times, and if you need to buy groceries or gas or pay a utility bill, that is perfectly understandable and probably okay with the credit card issuer. Just make sure that you stick to charging less than $675 from any one creditor, and that what you do charge is a necessity and not a luxury item. Luxury items would be things like dining out, vacations, jewelry, electronics, tickets to concerts and sporting events, etc.
2. Don't take cash advances on your credit card.
Another related issue is cash advances. Cash is unique because once you have it in your hand, there is no way the creditor or the bankruptcy trustee has of verifying what you spent it on. Even if you used the money for a necessity, like a car repair or a replacement for a broke stove, you must stay within the guidelines for cash taken from credit card. Stay under $925 when it comes to cash advances in the 90 day period before you file to stay on the right side of the trustee and the creditor. Note that the dollar limit refers to a total of $925 from all of your creditors combined, not each creditor.
3. Don't pay only one or certain creditors more than the minimum due.
There is good reason that sometimes chapter 7 bankruptcy is called "the liquidation bankruptcy." One of the goals of this type of bankruptcy is actually not that well-known to consumers who may be contemplating a filing. Once you file, your assets may be taken and sold, all to help pay some of that money to owe to your credit cards or other loans. While some of your property is protected with exemptions, the point of this practice is to try to distribute any funds garnered equally to all creditors fairly.
When a consumer takes it upon themselves to pay more than is needed to a certain creditor, it can raise red flags and cause your bankruptcy to be held up while the funds are recovered and redistributed. Do not pay any one creditor more than $600 in the 90 days prior to your filing, unless you are meeting the required minimum payments.
Work closely with your bankruptcy lawyer in the days leading up to your filing to avoid issues like these above. For more information, contact a company like Cowan & Brady Law Offices Of.