Avoid these mistakes when filing for Chapter 7 bankruptcy

The decision to file for personal bankruptcy under Chapter 7 of the U.S. Bankruptcy Code can be exceedingly tough to make. You may have spent ages running the pros and cons through your head before making your final decision to go ahead.

Having made that commitment, you need to avoid doing anything that could jeopardize your chance of achieving a clean break.

Moving money

You must be totally honest when you declare your finances. If a court discovers that you have passed money or assets to someone else just before you file, a judge could punish you. While it is natural to want to put some money aside somewhere safe, it’s not allowed.

Making unnecessary purchases

Perhaps you still have something left on your credit card limit, so decide you may as well use it to get something you always wanted but knew you could never afford. If you are counting on being allowed to keep it for free when bankruptcy wipes your debts, think again. Lenders and courts are wise to this and will be looking for any extravagant purchases you’ve made before filing.

Borrowing more money

Lenders often continue to offer new or expanded lines of credit to people who they can see are already struggling to make repayments. That does not mean you can take them up on their offer, grab an extra few thousand and assume the bankruptcy will write that off, too. A court may rule that you took it without having any intention of paying it off and insist you pay it back.

Both being thoughtful about your approach to money at this time and seeking legal help early can prevent you from making mistakes that could harm your bankruptcy filing.

Skip to content