When you are overwhelmed by debt, deciding to file for bankruptcy can feel like a massive relief. However, the weeks and months leading up to your actual filing are critical.
Simple, well-intentioned choices can accidentally jeopardize your case, delay your financial relief or even lead to accusations of fraud. Knowing what not to do is crucial if you are determined to take this step.
Transferring assets
Moving money, putting a car in a relative’s name or signing over property to protect it from creditors is a major mistake. The bankruptcy court closely reviews your recent financial history.
If you hide or give away assets before filing, the court can undo those transfers. A judge could seize the property anyway and potentially deny your entire bankruptcy discharge.
Spending a lot
Going on a final spending spree or racking up luxury expenses right before you file is a massive red flag. Running up credit card balances for non-essential items, expensive vacations or high-end goods can be viewed as fraud by the court. Creditors can challenge these specific charges, meaning you might still be legally obligated to pay them off even after your bankruptcy is finalized.
Taking out new loans
Borrowing more money, opening new credit lines or taking out payday loans to stay afloat right before filing for bankruptcy will complicate your case. The court scrutinizes any new debt acquired shortly before a bankruptcy petition. If it looks like you took out loans with no real intention or ability to pay them back, the judge may rule that those specific debts cannot be wiped out.
Preparing for a successful filing
The government heavily regulates the bankruptcy process. Remember, the choices you make today will directly impact your finances in the future. Staying informed about the rules may prevent costly errors and ensure your filing goes as smoothly as possible.