What Not to do Before Filing for Bankruptcy

After you’ve done your research about your financial situation and decided that filing for bankruptcy is the best course of action for you, it is important to remember that there’s more to the process than simply submitting the paperwork and showing up in court. There are, in fact, several things that you should not do before you file for bankruptcy (at least not shortly before).

Don’t get a cash advance

Deciding to max out your remaining credit simply because you plan to have the debt discharged will almost surely get your bankruptcy denied. In addition, filing for bankruptcy immediately after doing so is considered (criminal) fraud, and is punishable by law.

What Not to do Before Filing for BankruptcyDon’t pay off one creditor among many

Paying off a debt right before attempting to discharge other debts shows favoritism toward certain creditors at the expense of others. This includes paying off a family member, friend, or business organization. Even if you don’t get convicted of a crime for doing so, the creditors you pay will likely have to return the money, which will be applied proportionately toward all of your debts.

Don’t make large purchases

This is akin to getting a cash advance—making a larger purchase and then filing for bankruptcy soon after can be construed as fraud.

Don’t transfer or hide assets

If you fear that filing for bankruptcy will mean that you lose some personal possessions, that is a legitimate concern. But transferring those assets to someone else in the hope of keeping them is both financially risky and potentially illegal.

In the end, acting above board is essential in the course of your bankruptcy, even before your case is filed.

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