Common Chapter 7 Mistakes #2: Assets

Filing for bankruptcy is a sensitive matter that deserves much attention and focus. Before filing for either type of bankruptcy case debtors are advised to seek counsel from a qualified bankruptcy attorney. Meeting with a professional about your case and ensure that bankruptcy is the right choice for you and that you are adequately prepared for the process. It is especially important to make sure you have not engaged in certain actions prior to your filing that could jeopardize the chances of securing a debt discharge.

Transferring Assets

One action that people are often tempted into prior to filing for bankruptcy is giving or selling assets. The general mindset among debtors is that eliminating assets before bankruptcy can boost their chances of qualifying for Chapter 7 and provide them with some income that can be used to satisfy debts. If you have to sell an asset you must receive fair market value for the item and report that income to the court on your petition. In other cases, people may give assets to friends or family members in attempt to hide these assets from the courts. Withholding assets is prohibited and can lead to charges of fraud and the dismissal of your case. It is important that you do not attempt to move your assets prior to filing for bankruptcy.

Liquidating Funds

People who hold hefty retirement or investment fund accounts have also been known to sell or liquidate these funds prior to filing for bankruptcy. Again, this creates a problem with the court as it does not allow for an adequate picture of your financial standing to be observed. While the fear of losing these hard earned assets is what motivates people into liquidating certain funds, they generally do so unnecessarily and at the expense of the outcome of their case. Bankruptcy exemption laws offer protection over most of these funds. In other words, these type of funds are generally protected from creditors and will not be used to satisfy creditors, leaving you with full ownership over the money.