The process of Chapter 7 bankruptcy works to liquidate the filer’s non-exempt assets, distribute the value to creditors, and provide a discharge of debts to the filer. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act established stricter regulations for Chapter 7 cases. These regulations were intended to make it more difficult to commit bankruptcy fraud without repercussions when filing a Chapter 7 case.
Qualifying for Chapter 7 bankruptcy today means passing the Means Test, completing pre-bankruptcy requirements, and filing a bankruptcy petition that accurately represents your financial situation. With the help of Behm Law Group, Ltd., you can build a strong, successful case for Chapter 7 bankruptcy in Redwood Falls, MN and the surrounding area.
When you file for Chapter 7 bankruptcy, the bankruptcy trustee assigned to your case will review your financial records, both to cross-check the representations made on your bankruptcy documents and to determine if you qualify for bankruptcy relief. Because some of your financial records will be under review and because bankruptcy debt relief is intended to benefit only an honest and forthright filer, there are several actions to avoid before you file for Chapter 7 bankruptcy:
- Favoring a creditor: Choosing to pay more to one creditor over another is considered a “preferential transfer”. It could result in the trustee suing that creditor, recovering what you paid the creditor and evenly splitting that amount between all of your creditors. Generally, you want to show that you have acted with fairness to all of your creditors and that you have done everything you can do to repay your debts in an ordinary fashion.
- Transferring assets: If you transfer any asset out of your name to someone else before filing for bankruptcy relief and then don’t disclose that transfer in your bankruptcy paperwork you will be deemed to have committed a “fraudulent transfer”, even if you made the transfer without any bad intent. While such a “fraudulent transfer” generally won’t be considered a criminal act in most cases, it could result in the denial of a bankruptcy discharge and the trustee could sue the person you transferred the asset to in order to undo the “fraudulent transfer” and recover the asset.
- Credit card purchases: Credit card debt is included in your bankruptcy case, and is almost always fully discharged in a Chapter 7 bankruptcy. If you are using your credit card for anything not considered a necessity (food, gas, etc.) before filing, however, you could be deemed to be acting with fraudulent intent by purposefully adding to the debts you know will be discharged. A good example of this would be charging a vacation to Europe or Hawaii on a credit card and then filing for bankruptcy relief a month later. Under such a scenario, the credit card company could sue you in bankruptcy court and ask the bankruptcy court to except or exclude the debt from the discharge granted to you at the end of your case.
- Receive future payments: If you are aware that you will receive future payments while your case is still open, you will have to report those future payments and such future payments could be seized by the chapter 7 trustee and used to pay your creditors. A good example of this is if someone passes away within 180 days of the filing of your bankruptcy case and you inherit money or property. If this happens you must report it to the bankruptcy trustee and to your attorney. If you fail to report it, the trustee could ask the bankruptcy court to revoke or deny any debt relief that you would otherwise receive.
- Sue someone: If you have the right to sue someone for personal injury or property damage, (vehicle accident, someone else’s tree falling on your house etc.) you will have to disclose any such claims in your bankruptcy petition. Sometimes, the trustee will assist you and your attorney in resolving the claims. Sometimes, any settlement proceeds will be able to be fully protected/retained. Sometimes, some of the settlement proceeds will have to go to the trustee for the benefit of your creditors. If you have the right to sue someone, it is essential that you disclose this to your bankruptcy attorney before your bankruptcy case is filed so that you and your attorney can determine how to properly disclose and prosecute the claim and protect as much of the resulting settlement proceeds as possible.