Declaring Bankruptcy In The New Year? Don't Mess It Up Over The Holidays

19 December 2022
 Categories: , Blog

Are you considering filing for bankruptcy protection in the new year? Even if you're still undecided about this big step, the moves you make beforehand can have a big impact on your success or failure. How? Here are a few things to keep in mind.

1. Avoid Credit Card Fraud

Bankruptcy fraud — whether accidental or intentional — can scupper your bankruptcy case. The judge may also deem the associated debt non-dischargeable. One of the biggest types of bankruptcy fraud is charging up debts with no intention to pay them back. Don't let any gift-giving look fraudulent. 

While the bankruptcy trustee doesn't expect you to spend absolutely nothing, they do expect it to be reasonable given your circumstances. The best way to spend on the holidays is to use cash rather than credit cards or cash advances. 

2. Don't Transfer Assets

The bankruptcy trustee can look back over a period of time to determine if there were any improper moves with your finances. 

If they see that you transferred assets that could have been used to pay debts during Chapter 7 bankruptcy, for instance, they can view this as fraud. Not only could your case be in danger, but the person to whom you gave the asset may have to return it. 

If you do transfer an asset to a friend or family member this season, discuss it further with a bankruptcy attorney beforehand. There are legitimate reasons to give assets, but you'll need to stay within the rules. 

3. Learn About New Assets

Once you file Chapter 7, your assets will be subject to liquidation to pay debts as of that date. If you are gifted new assets yourself over the holidays, they may be subject to sale as well. So you may want to stipulate a maximum dollar value for gifts this year. 

The exception to this is if something will qualify for an exemption. Bankruptcy exemptions are a list of categories of assets and the dollar value which you can exempt from liquidation. The categories vary, ranging from specifics like jewelry and firearms to the home and vehicles. You may also have access to a wildcard exemption for any uncovered asset. If your gift falls into these categories, it's protected. 

Where to Start

No matter what your gifting plans are this year, the best place to begin is meeting with a qualified bankruptcy attorney in your state. They will offer guidance to help you avoid any accusations of fraud and protect the new assets you receive. Call today to make an appointment with a local bankruptcy attorney