The bankruptcy process is not designed to be difficult for consumers, but there are several rules and guidelines that must be followed. These rules can make it difficult for some people to qualify or obtain a debt discharge if they aren’t careful. In general, there are a few mistakes people often make before even filing for Chapter 7 that can significantly impact the outcome of their case.
Many people are tempted into messing with their finances prior to filing for bankruptcy. It is important that you don’t try and pay off a debt before filing for bankruptcy. The reason is that your debt totals are a major factor used in determining your eligibility for filing. Significantly reducing your debts before filing can disqualify you from filing Chapter 7. However, it is also important that you don’t stop paying your debts altogether. Strategic default is not an effective strategy and could work against you in the process.
On the other hand, accumulating more debt prior to filing bankruptcy can also be problematic. Bankruptcy laws prohibit the inclusion of certain debts if they were acquired within the few months leading up to the filing. The general rule of thumb is that any credit card debts exceeding $600, and acquired within 90 days of filing, may not be eligible for discharge. Further, cash advances acquired within 70 days prior to filing that exceed $750 may also be disqualified.
Another big determining factor for Chapter 7 eligibility is your income. Therefore, it is important that you do not get a second job, or bring in more income, in the months leading up to your filing. While paying down your debts is a good thing, many people find they cannot pass the Chapter 7 means test with additional income. On the other hand, purposely quitting a job prior to filing can also be detrimental to your case. This action may be viewed as suspicious to the bankruptcy court and lead to negative outcomes in your case.