Bankruptcy is a legal process available for people to use when they find themselves in desperate financial situations. While filing for Chapter 7 bankruptcy has consequences, it also has a lot of benefits too; however, you cannot file unless you qualify. You should also know that there are certain things you cannot and should not do before you file, and here are three of these things.
Give Away Your Assets
If there is one thing you should know about Chapter 7 bankruptcy, it is that you stand to lose some of your assets when you file. Qualifying for Chapter 7 allows you the right to have your debts discharged, which means they are wiped out, forgiven, and gone. The downside to this is that if you have assets of value, the bankruptcy trustee can seize them and sell them to raise money to repay some of your forgiven debts.
Because of this, it might be tempting for you to "give" some of your things away before you file. For example, if you have a classic car that you do not want to surrender in the bankruptcy proceedings, it might be tempting for you to transfer the title of the car to a trusted relative for a temporary period of time. The act of doing this is strictly prohibited before or during a bankruptcy case.
If you get caught doing this, the bankruptcy trustee has the right to dismiss your case, leaving you without any of the benefits of a Chapter 7 bankruptcy. In addition, if this happens, you will not be allowed to file for bankruptcy for at least 180 days from the time the dismissal takes place.
File a Lawsuit
While it is not against the law to file a lawsuit prior to filing for bankruptcy, it would not be advantageous for you to do this. When you file for Chapter 7, you will have to disclose all your income, debts, and assets. You will also have to disclose any inheritances you might be receiving soon, or any compensation you are expecting from lawsuits.
If you are in the middle of a lawsuit when you file, the bankruptcy trustee must know about it. In other words, you must legally disclose this information when you file. This is legally required because the trustee handling the case has the right to seize the money you win from the case. This money is considered an asset and can be used to repay the debts that are included in the bankruptcy.
If you want to file a lawsuit against someone, you should either wait until after you file for bankruptcy, or you should wait to file for bankruptcy for six months after the lawsuit is settled. The reason for this is due to the six month period of income you are required to report when you file for Chapter 7. If you have to include this money in your income, you might not meet the requirements for Chapter 7.
Lie About Anything
Finally, you should realize that if you lie about your income, assets, or debts when you file, your case could get dismissed immediately. Bankruptcy trustees are used to complete bankruptcy cases, and one of their jobs is to examine a person's application. If they find any type of miscalculation, discrepancy, or problem, they have to right to dismiss the case without any warning.
If you want to file for Chapter 7, but do not meet the requirements, it is better to file for Chapter 13 or use a different type of debt solution to help you through your financial crisis. To learn more about this subject, contact an attorney that offers bankruptcy services or go to sites like the one linked to in this sentence.