Mistakes In Chapter 7 Cases

The bankruptcy process is not meant to be inherently difficult, but there are several rules and guidelines that must be followed in order for a case to be successful. Debtors should be adequately prepared coming into the process and be aware of certain actions that could influence the outcome of their case. A good rule of thumb before filing for bankruptcy is to be still and wait. Making certain changes could impede the case, preventing a debt discharge.

Debts

A common temptation among bankruptcy filers is to try and pay down debts or boost income before filing for bankruptcy. The total amount of debt is extremely important when filing for bankruptcy because it is a big factor in determining eligibility. Reducing debts prior to filing could potentially disqualify an individual, leaving them without the protection they need. Increasing one’s income prior to filing could also impede their chances at qualifying for bankruptcy, especially in a Chapter 7 case.

There are some cases in which people accumulate more debts prior to filing for bankruptcy. These actions could be considered fraudulent and lead to serious consequences. Even if debts are acquired accidentally prior to filing, they may not eligible to be included in the case. Bankruptcy laws prohibit debts $600 acquired within 90 days of filing from being eligible for discharge. Cash advances acquired within 70 days prior to filing that exceed $750 may also be disqualified.

Assets

A debtor’s assets are extremely important when evaluating a person’s bankruptcy case. The court uses a list of assets to determine eligibility and potential for debt repayment. Fear of losing assets to creditors often motivates people into selling or giving away assets prior to bankruptcy. Not only may these actions be considered fraudulent, they are generally unnecessary.

The reason is that bankruptcy exemption laws protect much of a debtor’s assets in a Chapter 7 case. In most cases, a person’s house, car, personal property and other assets will be exempt from liquidation by creditors. Although selling assets before bankruptcy is not strictly prohibited, the debtor must follow certain rules. Any asset that is sold prior to bankruptcy must be sold for fair market value and the income received from the sale must be reported to the court on the bankruptcy petition.

Some people choose to liquidate retirement or investment funds prior to bankruptcy, which creates a similar problem as with other assets. Without the reporting of the money in these funds, the court cannot accurately evaluate a debtor’s financial situation. Further, these funds are typically protected under bankruptcy exemption laws as well.

The Lee Law Firms aims to help local residents resolve their debt issues and achieve a financially healthy future. They provide high quality legal representation that helps lower monthly debt payments, stop wage garnishment, prevent foreclosures, and stop calls from creditors. The Lee Law Firm bankruptcy attorneys have many years of experience in all aspects of Chapter 7 and Chapter 13 Bankruptcy in Fort Worth.

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