What are some of the common mistakes people make before filing bankruptcy?

Can I Repay My Friends or Relatives Before Filing Bankruptcy?

 

If you owe money to friends or relatives, they are likely to be in the same rank of unsecured creditors
with your credit card companies. One of the duties of a trustee in bankruptcy is to make sure that all unsecured creditors are treated equally (i.e., while they are behind secured creditors in rank, they rank equally among themselves). If you repay your friends or relatives, or other “insiders” while not paying your other creditors, the transfer may be considered a “preference” and the bankruptcy trustee may”avoid” or reverse the transfer.

While the court looks back 90 days from the filing date for payments made to non-insiders, there is longer look-back period for payments made to “insiders,” or people who have a close relationship with you because they were not dealt at arm’s length.

If you are thinking about filing bankruptcy, you need let your attorney know about all payments made
prior to filing to discuss how best to protect you or your family and friends. 



The Bankruptcy Code gives you property exemptions, because it recognizes that in order for people to move forward after bankruptcy, people have basic needs. If a property is exempt, it can’t be used to pay your creditor’s claims.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.





Can I Sell, Give Away, Transfer Title, or Dispose of My Property Before Filing?

 

The Bankruptcy Code gives you property exemptions, because it recognizes that in order for people to move forward after bankruptcy, people have basic needs. If a property is exempt, it can’t be used to pay your creditor’s claims.



Most of the assets that a typical Chapter 7 bankruptcy debtor owns are exempt under the federal and state exemption law. You may, however, own an asset whose market value far exceeds the amount allowed under the exemption law.

While some pre-bankruptcy planning may be allowed, putting property you own into someone else’s name to avoid it being taken by creditors or the trustee may be considered a avoidable transfer and can result in your discharge being denied. In addition, the trustee may be able to recover the property from the person to whom it was transferred.

The transfer of assets during the months and even years prior to the filing of a bankruptcy petition could constitute a “fradulent transfer” regardless of your subjective intent to defraud creditors, especially if the transfer was made to an ”insider” (e.g., family, relatives, or friends) for less than the fair market value of the property at a time when you were “insolvent” (or had other debts that you couldn’t repay).

If you have assets that you are contemplating to dispose of before filing bankruptcy, you should first
discuss your situation with a competent bankrutpcy attorney in your area.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.



Can I Max Out My Credit Card Before Filing Bankruptcy?

 

Maxing out your credit cards or making large purchases before filing bankruptcy is generally considered a
bad idea. Similarly, cash advances in large amounts or balance transfers may be subject to scrutiny.

Here is the reason why. While it is true that the bankruptcy law protects individual debtors, it is not
a blanket protection. If you try to beat the system, a creditor might bring a “non-dischargeability” action in court. And if a judge finds that based on circumstantial evidence, the debtor had no intent to repay at the time of incurring the debt, it will not be discharged.

If you are considering filing bankruptcy and you are concerend about a recent purchase or transaction,
you should seek advice from an attorney specializing in bankruptcy law for further information.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.