Actions to Avoid Before You File for Bankruptcy

When you are planning to file for consumer bankruptcy—either Chapter 7 bankruptcy or Chapter 13 bankruptcy—there are a number of steps you will need to take to prepare for your bankruptcy case. At the same time, it is important to know that there are actions you should not take as you are getting ready to file for bankruptcy for various reasons. In some situations, actions taken prior to a bankruptcy filing can be construed as a fraud, and you can risk your ability to receive a bankruptcy discharge, not to mention the risk of criminal charges. Differently, some actions that you might take concerning your money could result in otherwise exempt assets being liquidated in your Chapter 7 case.

Anytime you are thinking about bankruptcy, you should work with an experienced bankruptcy lawyer to ensure that you put yourself in the best possible position to get back on track with your financial life and make the most of your bankruptcy case. In the meantime, you should be aware of the following actions to avoid before you file for bankruptcy.

Never Attempt to Conceal Your Non-Exempt Assets

One of the biggest errors you can make before you file for bankruptcy is to attempt concealing your non-exempt assets so that they will not be liquidated in your bankruptcy case. First, under the U.S. Bankruptcy Code, you should know that non-exempt assets are only liquidated in Chapter 7 bankruptcy cases and not in Chapter 13 cases. Accordingly, you should not even be concerned about your assets being liquidated if you are filing for Chapter 13 bankruptcy.

But if you are filing for Chapter 7 bankruptcy, failing to list your non-exempt assets on a required schedule or “gifting” the property to a friend or family member in order to conceal it from the bankruptcy court is unlawful. Not only will you be denied a bankruptcy discharge, but you can also end up facing criminal charges related to bankruptcy fraud.

Avoid Accruing Additional Debt Because You Think it Will be Discharged

Just as you should avoid concealing assets in any capacity, you should not accrue additional consumer debt prior to filing for bankruptcy because you are assuming it will be discharged. If you must incur debt—such as medical debt, for example—the bankruptcy court will not likely assume fraud. However, charging additional products or services on your credit card can result in serious problems in your bankruptcy case.

Do Not Convert Exempt Assets to Non-Exempt Assets

Many assets are exempt under Illinois law. Accordingly, it would be an enormous mistake to convert exempt assets to non-exempt assets without realizing you are doing so. For example, most retirement benefits are completely exempt. If you withdraw a portion of your retirement balance in order to have cash on hand, that cash will not be exempt at the same rate as your retirement savings.

Contact Our Oak Park Bankruptcy Attorneys

Are you thinking about filing for consumer bankruptcy? Do you have questions about the steps you need to take now and those that you should avoid before your bankruptcy case? An experienced Oak Park bankruptcy lawyer at our firm can talk with you today about your case and can ensure that you are prepared to file. Contact the Emerson Law Firm to find out more about how we can help with your personal bankruptcy case.



See Related Blog Posts:

Can I Back Out of a Bankruptcy Case if I Change My Mind?

How Does Chapter 13 Bankruptcy Result in a Debt Discharge?

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