How Spending Affects Chapter 7 Bankruptcy Filing

There’s a lot of great things you can do to prepare for a Chapter 7 bankruptcy. However, the opposite can also be true. Certain behavior can hurt your bankruptcy case. In particular, shopping before Chapter 7 can cause some serious issues.

As a Memphis bankruptcy attorney, I’ve seen a number of ways over-spending in advance can hurt a person’s bankruptcy plans. Fortunately, there’s a lot you can do to prevent this problem.

Potential Fraud or Just an Accident?

To understand how spending before Chapter 7 affects your case, first you have to understand how this type of bankruptcy works.

Chapter 7 is a debt forgiveness plan that gives you a clean slate and a fresh start. Generally speaking, it forgives your unsecured debts: credit card debt, medical debt, and more.

As a result, the courts look at your recent credit and spending to make sure you’re filing in good faith. If you’ve spent a lot right before filing bankruptcy, it can raise concerns. And that’s especially true if you’ve bought more than your normal spending habits.

Luxury items like expensive jewelry, clothing, transportation, and more, can cause courts to wonder about your motives. They’ll potentially suspect you bought these items knowing you wouldn’t be able to cover the cost. In legal terms, that’s considered fraud.

Transferring Property Ahead of Chapter 7

The same rules apply with transferring property as they do with shopping before Chapter 7. You always want to be careful not to hide assets. (Or, if it’s all meant in good faith, not to appear like you’re trying to hide assets even if you aren’t.)

So before filing bankruptcy, don’t transfer any major property to family or friends. Similarly, don’t give away large amounts of money to family or friends. And don’t make loans to people, either.

If you find yourself in a situation where you really need to do one of these things for some reason, speak with a bankruptcy lawyer about it first. There’s no risk in doing this. Our firm offers a free consultation, and we discuss this sort of thing with clients all the time so they understand all of their options before filing.

filing an SSDI appealPre-Bankruptcy Planning

With all of that said, it’s totally OK to plan ahead before filing bankruptcy. Pre-bankruptcy planning is a good thing. There’s a lot you can do to arrange your affairs so your bankruptcy is the most successful it can be and helps you accomplish all of your goals.

In addition, you should learn whatever you can about your buying power after a bankruptcy. Sometimes smart spending after a Chapter 7 can help you improve your credit and start your new life well. You just want to do this wisely and with the help of an attorney who cares.

To that end, we’ve published a free report available to anyone called Life After Bankruptcy. In this report, we talk about buying a house or car and rebuilding your credit after Chapter 7. As we show in the report, spending wisely at this stage could set you up financially for the long-term.

Help from the Right Memphis Bankruptcy Attorney

If you’re worried about spending before Chapter 7 or think you might have made an unwise choice, don’t lose hope. Just talk with an attorney who understands the legal process and can help you make smart decisions about filing.

At our firm, we protect your interests. We base our timing and the type of bankruptcy around your goals, and we help you figure out any issues that might be a problem for the courts well in advance. 

Our award winning team is here for you. We’ve built our reputation on helping our clients through all sorts of tricky questions and issues. Spending habits can be one of those things, especially for people filing bankruptcy due to credit card debt.

To get started with a free consultation, no strings attached, contact us online using the form below or give us a call at 901-327-2100.

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