Making prudent use of the financial help that filing for Chapter 7 bankruptcy can provide is one of the smartest things you can do if you’re overwhelmed by accumulated debts and financial obligations. Chapter 7 was designed to help people recover from crippling debt and get back on their feet financially. The U.S. Bankruptcy Courts have to treat each case with fairness to debtors and creditors alike, so Chapter 7 works as a balanced process. Behm Law Group, Ltd. helps filers with legal advice and assistance throughout the process of filing for Chapter 7 bankruptcy in New Ulm, MN.
To keep things balanced between creditors and debtors, Chapter 7 bankruptcy works to discharge your debts while simultaneously liquidating your nonexempt assets, if any, to repay your creditors. Most cases, however, are “no asset” cases which means that all of one’s assets are exempt and creditors don’t get paid anything. It’s your job as a debtor to claim your own exemptions to prevent assets from being unnecessarily liquidated. The flipside to claiming exemptions, however, is that it’s possible to claim too many for your case.
Excessive Exemption Planning
Generally speaking, exemption planning—taking assets you may not be able to keep in bankruptcy and liquidating them and using the money to pay down your mortgage or purchase assets that you would be able to keep so you can maximize your exemptions—can be a tricky process. In fact, it can be considered fraudulent behavior and can be a basis for the dismissal of a bankruptcy case or a denial of all and any debt relief. That being said, there are times when exemption planning is possible when it comes to making purchases before filing for bankruptcy.
Purchasing Before Bankruptcy
Many purchases you make on credit before filing for bankruptcy can be construed as fraudulent use of credit and can render the subject credit debt non-dischargeable. For example, any debts you gather within 90 days before filing for bankruptcy that exceed $675 in total can be considered non-dischargeable. This applies to “luxury goods,” a term that covers most purchases that are not necessary to your household like televisions, furniture, trips to Hawaii or Europe. Purchases that you are allowed to acquire credit debt for within the 90-day period before filing for bankruptcy includes necessities like food, gas, rent, and auto care. These debts may still be petitioned for discharge.
Your spending during the 90-day period prior to filing for bankruptcy is flexible. If you make some bad choices, however, by “maxing out” your credit before filing for bankruptcy, many of your debts may not be discharged, and your case may even be dismissed. Behm Law Group, Ltd. can help you navigate exemption planning and purchasing before you file for bankruptcy in New Ulm, MN. For more information, contact us today at (507) 387-7200.