If you are feeling overwhelmed by debt, you may be able to have the fresh start you need by filing for bankruptcy. If you have engaged in certain financial activities within a certain time prior to filing your petition, you may need to delay the date of your filing. Other actions may subject you to criminal charges. A bankruptcy attorney can advise you specifically about how your financial dealings may affect your petition. Some actions you take may prevent you from filing or from having your debts discharged. Some specific actions you should not take include:
- Trying to hide non-exempt property. The bankruptcy trustee evaluates your assets and property that is not exempt will be taken and sold to pay your creditors. Some people try to keep the property from the trustee by transferring ownership of nonexempt property to a family member or friend. If you have done this within one year prior to filing, there are serious consequences and you may even face criminal charges in addition to having your petition dismissed without having your debts discharged.
- Making preferential transfers. If you repay loans to family members or friends within one year prior to filing for bankruptcy, or pay certain creditors within 90 days prior to filing, these may be considered preferential transfers. They trustee has the option of filing an adversary proceeding to get the money back from those you paid and then use the funds to distribute to all of your creditors.
- Accumulating new debt within 90 days prior to filing your petition. If you obtain a loan to buy a luxury item, get cash advances on your credit card or charge it to its maximum limit within 70 to 90 days prior to filing your bankruptcy petition, it is presumed you fraudulently incurred that debt with the intent to never pay it. You bear the burden of proving you were not acting fraudulently.
If the trustee believes you committed fraud, those debts will not be discharged. You may also be subject to criminal prosecution for fraud. Medical expenses and items necessary for daily living, like food and shelter, are not considered luxury items. Designer clothes, jewelry, expensive perfume and home decorative items are examples of items courts have considered to be luxury items.
- Withholding any financial information from your bankruptcy attorney. Bankruptcy law is complicated. There are many rules and regulations and exceptions to the rules and regulations. A bankruptcy attorney will evaluate your situation and advise you on whether the time is right for you to file your petition or if it is in your best interest to delay filing. If you have not been honest with your attorney, he or she cannot properly advise you.
Stephen Burton has served as an attorney for bankruptcy trustees, taught bankruptcy at the National Business Institute and practiced before the bankruptcy courts. He regularly attends continuing education classes. As a consequence, virtually every case he files is successful.