Your personal financial decisions may have led you to consider filing for bankruptcy. If you are considering filing, you should be aware that the timing of your financial transactions could have a major impact on your bankruptcy should you choose to file. There are four main issues concerning pre-bankruptcy spending and credit card use to consider:
- Luxury Items: Using your credit cards to charge certain items within a specified period of time could be contested at the bankruptcy hearing. You may use your cards up to your filing date, however charging $650 or more on luxury items within 90 days of the filing will cause extra scrutiny. Luxury items are items not needed for day to day living. You will have to prove that you needed the item. For example, replacing a broken washing machine may be approved, taking a vacation would likely not.
- Cash Advances: Using your credit cards to take cash advances could trigger a creditor's interest. If you take $925 or more in total in the 70 days before your filing from a credit card or a combination of cards, you may not be able to discharge that amount through bankruptcy.
- Paying Only Certain Creditors: The goal of bankruptcy, at least from the viewpoint of the court, is to provide a fair distribution of available assets and debt to your creditors. If you have paid more than $600 of a debt to a creditor, friend, relative or business associate in the 90 day period before filing, it could cause the court appointed trustee to "take back" that money and redistribute it more fairly among the creditors.
- Transferring Property: The bankruptcy court would be highly suspicious of any transfer of property prior to a bankruptcy and would likely suspect that the transfer was done with the intention to hide assets from your creditors, for which you could be criminally liable. Each state has it's own rules, but generally the trustee will look at whether or not the property was sold or transferred below it's market value and the length of time that has elapsed from the sale or transfer till the bankruptcy filing.
Running afoul of these laws could result in not only a delay in your bankruptcy proceedings and cause your bankruptcy to be denied (canceled), but you may also be charged with fraud if the trustee suspects that you have intentionally attempted to run up your credit card debt or hide your assets from creditors. It is vital that you fully disclose in full your financial transactions to a bankruptcy attorney (such as one found through http://www.howardgoodmanlaw.com/) and carefully heed his advice to ensure a lawful proceeding and a clear conscious as you make your fresh start.