Once the decision to declare bankruptcy is made, you may want to look at the time leading up to your actual filing as a preparatory period. You could end up ruining your chances for debt relief if you are not careful with your financial actions in the months right before your filing. Read on to learn more so that you can avoid making these mistakes.
Credit Card Use
When it comes to debt loads, credit card use has led to many a bankruptcy filings. Those little pieces of plastic look harmless, but you probably already know how easy it can be to use them until you can no longer make the minimum payments each month. Just as credit card use can send many people to the bankruptcy lawyers, it also represents one of the best reasons for declaring bankruptcy. Credit cards fall into that debt category called unsecured, which means that you won't lose any property by including them on your debtor matrix.
You should know, however, that your credit card use in the months leading up to your filing can come under scrutiny. Whether it's charging something on the card or using it take cash out of the ATM, there are rules and limits on use. The reasoning behind the rules are to prevent people who know they are about to declare bankruptcy from going wild with their available credit and running everything up to the limit. That being said, you can still use your cards and get cash, as long as you obey the rules.
When it comes to what you charge, you can charge for needed items, but not for frivolous things. If you need a new washing machine, that would be considered acceptable. If you "need" a new Louis Vuitton handbag, that would not be acceptable. Cash withdrawals using your credit card is limited not by the reason, but by the amounts.
Favoring Certain Creditors
It's only natural; you feel bad about including that loan from a family member in with your bankruptcy, so you pay the debt off before filing. While that action may seem harmless enough, the bankruptcy courts may have other ideas about it. You should keep in mind that the main purpose of a chapter 7 bankruptcy filing is to distribute any of your available assets among your creditors. The bankruptcy court wants to be the one to decide who gets paid and who does not, so do not give any large sums of money to anyone in the time leading up to your filing.
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