If you’ve decided that bankruptcy is the best solution to an overwhelming debt problem, you don’t want mistakes and missteps to prevent you from getting the relief you need. Below are some of the activities and transactions that may result in your petition being refused, as some debtors employ them to minimize the negative effects of their bankruptcy. Knowing what they are and avoiding or handling them appropriately prior to filing will improve your chances of a successful discharge.
If you transfer any assets for any amount less than their fair market value during the six-year-period prior to filing for bankruptcy, the transfer could be regarded as fraudulent. This often happens when a debtor transfers the assets in question to a spouse, family member, or friend. In New York, the statute of limitations for fraudulent transfers is six years, and any such transfers that occur during that period can be reclaimed by a Chapter 7 trustee.
If you believe that you have made a transfer that can be perceived as fraudulent, discuss the situation with a New York bankruptcy attorney. They may recommend undoing the transfer, or filing Chapter 13 instead as such transfers are considered in the creditor repayment plan.
Paying family and friends back first
When you owe money from friends and family members, it’s natural to want to repay them before filing for bankruptcy. Before you do so, be aware that if you did so in the one year prior to filing for Chapter 7, your trustee can recover the money for the benefit of all your creditors. If you have treated a creditor in a preferential manner, either wait one year from the date of the repayment before filing, or have the person return the payment.
Using credit cards prior to filing
Avoid using any credit cards in the months or, ideally, year prior to filing for bankruptcy. If you made any purchases for non-essentials, the debt could be declared non-dischargeable and you could be denied a discharge from your bankruptcy.
You are self-employed
Anyone who files for bankruptcy must provide their trustee with details about their current income and anything they made in the preceding six months. This evidence comes in the form of pay stubs and the most recent tax return. If you are self-employed, there should be separate bank accounts for your business and you personally, so that personal and business expenses are more reviewed.
To ensure that your bankruptcy proceeds as smoothly as possible, consult with a New York bankruptcy attorney. After an in-depth and honest discussion, they can advise you on how to deal with potential problems and properly prepare for filing, so that you get the fresh start you need. Jayson Lutzky is a Bronx, NY attorney who offers free in-office consultations to prospective bankruptcy clients. He offers convenient Saturday hours and can be reached at 718-329-9500. Visit www.MyNewYorkCityLawyer.com/Bankruptcy to learn more about how you can get a fresh financial start.