Chapter 7 bankruptcy provides debtors with a great way to eliminate debt and start over financially. However, there are several actions that debtors should avoid taking before filing for Chapter 7 bankruptcy. The reason for this is that the bankruptcy court will examine a debtor’s past transactions made within a specified period prior to filing. This period, which can vary based on several factors, is known as the lookback period. Any prohibited actions taken during this period can jeopardize the bankruptcy proceeding. Therefore, if you’re considering filing for Chapter 7 bankruptcy, you must ensure that you don’t take any prohibited actions during this period. In this article, we discuss what not to do before filing for Chapter 7 bankruptcy.
Don’t Transfer Any Assets Prior to Filing for Chapter 7 Bankruptcy
People sometimes attempt to shield their assets from the bankruptcy court by transferring them prior to filing for Chapter 7 bankruptcy. For example, a filer may put assets in someone else’s name or transfer them to a family member’s bank account. However, taking these kinds of actions won’t protect a filer’s assets from the bankruptcy process. In fact, making such transfers can lead to fraud accusations from the bankruptcy court.
Don’t Favor Certain Creditors Prior to Filing for Chapter 7 Bankruptcy
Consumers sometimes attempt to pay back certain creditors fully prior to filing for bankruptcy. Although this is usually done with good intentions, bankruptcy law prohibits such transactions. Payments made prior to filing for bankruptcy are called “preferential transfers,” and they can result in what is called a “clawback” lawsuit in which the bankruptcy trustee sues to retrieve the money that the consumer paid out.
Don’t Make Credit Card Purchases Prior to Filing for Chapter 7 Bankruptcy
Unless you absolutely must use credit to purchase necessities, such as food, gas, and housing, you should refrain from using credit cards prior to filing for Chapter 7 bankruptcy. If you make any luxury purchases on credit prior to filing for bankruptcy, you run the risk of a creditor objecting to the discharge of the debt.
Don’t Make Unusual Deposits Prior to Filing for Chapter 7 Bankruptcy
Finally, prior to filing for Chapter 7 bankruptcy, you shouldn’t deposit money into your bank account that isn’t considered payment or salary. For example, you shouldn’t deposit money that isn’t yours into your account as a favor for a friend.
Contact a Dallas Bankruptcy Lawyer
If you are interested in filing for Chapter 7 bankruptcy, you should contact an experienced Dallas bankruptcy lawyer for guidance. At Toronjo & Prosser Law, our experienced bankruptcy lawyers will guide you through the Chapter 7 bankruptcy process to ensure that you comply with all legal requirements and receive the full benefits of your filing. Please contact us to arrange a confidential consultation with an experienced bankruptcy lawyer.