Filing For Bankruptcy? Avoid These Issues

If you want some quick relief from a staggering debt load, few legal moves are as efficient as filing a chapter 7 bankruptcy action. However, making the wrong moves before you get around to filing can create issues for some filers. Read on and learn more about avoiding the below troubling issues.

Honoring Family Debts

When hard times hit, it can be comforting to turn to a friend or family for a loan. However, it can then be embarrassing when you end up filing for bankruptcy. Filing means you must include all debts, even personal loans between loved ones. Don't be tempted, though, to try and pay back those personal loans before you file. The bankruptcy trustee may look back at your financial transactions in the months prior to your filing to locate any large sums of money paid to a person or business. They have the power to take that money back from your friend or family member and use it to pay off debts. This issue can also hold up your bankruptcy even if you meant no harm. Instead, wait until your bankruptcy is final and then make good on the debt.

Be Forthcoming and Honest

When you fill out and sign your bankruptcy forms, you are doing so under the threat of perjury. That will be the least of your troubles, however, if you lie to your lawyer or fail to disclose everything on your paperwork. Once you declare bankruptcy, you are opening your financial situation to the trustee and they have the ability to verify your income, assets, and more. If the trustee finds that you withheld information knowingly, you could be charged with fraud and your bankruptcy could be dismissed with prejudice.

Being Generous

Chapter 7 bankruptcy allows filers to keep most of their property, but it can still mean some losses. If the filer has a lot of assets, there is a chance of losing some that are not protected by exemptions. For instance, recreational items like boats, jet skis, and other such things are seldom protected and therefore may be at stake. Filers wishing to hold on to their property might "give" such property to others or they might even sell it to them. However, taking those actions in the months prior to filing could cause the transactions or gifts to be undone.

Before you give away, sell, or pay off loans before you declare bankruptcy, speak to a bankruptcy lawyer to make sure that your moves are legal, won't hold up your bankruptcy, and won't be seen as fraudulent.

Contact a bankruptcy lawyer for more information.