Understanding Bankruptcy May 27, 2020

BY MICHAEL A. CIBIK, ESQ.
AMERICAN BANKRUPTCY BOARD CERTIFIED
Question: What should I not do before filing for bankruptcy?

Answer:You can avoid problems with a bankruptcy filing by taking some proactive steps ahead of time.

There are two specific situations where you can run into problems with a bankruptcy filing. The first is running up your credit cards to the maximum amounts with frivolous purchases such as high-end cell phones, large-screen televisions, or other similar types of purchases. This does not mean if you or your child needs a warmer winter coat, or your heating system goes on the blink you should avoid using your credit card. However, one of the items the trustee may look at is what new credit you incurred over the last six months and how it was used. Frivolous purchases could be considered fraudulent use of bankruptcy which could lead you to face criminal charges.

The other issue is disposal of property which you have in your possession and transfer to another person or sell. You are well within your rights to liquidate or transfer any assets you own at any time. However, if you are considering filing bankruptcy, you want to make sure you have sold the property for market value and keep records of how the proceeds were used. This is important so the court does not suspect you have disposed of the property for the sole purpose of protecting it in a bankruptcy proceeding.

Keep in mind a bankruptcy trustee will review any property transfers made within certain time periods and they will investigate whether they believed the intention was to defraud your creditors. Should they be able to determine this is the case, they may claw back the asset from the person who purchased it or to whom you transferred the property.

That’s why it is important to be honest with your bankruptcy lawyer so that they can help you fully disclose any issues and avoid trouble.

Michael A. Cibik, Esquire
www.ccpclaw.com
ccpc@ccpclaw.com
215-735-1060

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