Thinking of Chapter 7 Bankruptcy? Don't Do These 3 Things.

TL;DR

Before filing for bankruptcy, avoid repaying family or friends, giving away assets, and using credit cards for luxury items or cash advances.

Transcript

• Hey everybody, John Skiba here from the Arizona Consumer Law Group. I'm also the founder of The Consumer Warrior Project, which is what this YouTube channel is all about. It providing you with strategies and tips on how to deal with serious debt problems. If you want to learn more about those things, go ahead and subscribe to the channel. Then yo... Read More

Key Insights

• 🥳 Repaying family or friends before bankruptcy can lead to complications for both parties involved.
• 📼 Transferring assets before bankruptcy is a felony and can result in legal consequences.
• 💳 Using credit cards for luxury items or cash advances before bankruptcy may lead to specific charges being objected by creditors.
• 🏃 Bankruptcy provides a powerful tool to eliminate most debts, but caution must be exercised with financial transactions before filing.
• 👪 Waiting for a year after the last payment to family or friends can avoid complications during bankruptcy.
• 📼 Bankruptcy trustees are knowledgeable about common tricks used to hide assets, so attempts to transfer assets may be discovered.
• 🥳 Luxury items purchased within 90 days prior to bankruptcy filing may face objections from creditors during the bankruptcy process.

Questions & Answers

Q: Why should you avoid repaying family or friends before filing for bankruptcy?

Repaying family or friends is considered a preference and can cause problems during the bankruptcy process. The trustee may ask for the money back, making things awkward for both parties involved.

Q: What are the consequences of transferring assets before filing for bankruptcy?

Transferring assets to hide them from the bankruptcy court is a felony. It is illegal to intentionally transfer assets out of your name, and the bankruptcy court is likely to find out. Additionally, the bankruptcy trustee can reverse transactions made within the two years prior to filing for bankruptcy.

Q: What items are considered luxury items in terms of credit card usage before filing for bankruptcy?

The bankruptcy code does not provide a specific definition for luxury items. However, vacations, jewelry, and big-dollar items are typically considered luxury items. Buying necessities like diapers or groceries is generally not considered a luxury item.

Q: Can cash advances on credit cards cause issues when filing for bankruptcy?

Yes, cash advances within the 70 to 90 days prior to filing for bankruptcy can cause problems. If the cash advances exceed $1000, creditors may object to those specific charges, making it more difficult to have them discharged in bankruptcy.

Summary & Key Takeaways

• Repaying family or friends before filing for bankruptcy can cause problems as it is considered a preference and the trustee may ask for the money back.

• Transferring assets to hide them from the bankruptcy court is a felony and can lead to serious legal consequences.

• Using credit cards for luxury items or taking cash advances within 70 to 90 days before filing for bankruptcy can result in specific charges being objected by creditors.