When filing for Chapter 7 bankruptcy, it’s essential to follow the advice of your bankruptcy attorney during the process to ensure all of the steps are completed correctly.


But did you know it’s also crucial to take the right actions BEFORE you file for Chapter 7 bankruptcy, too? Following the correct steps before filing can help the process go smoothly. 


Don’t Transfer Your Assets Into Another Account

Are you worried about losing money in your accounts during bankruptcy? While you might think the smart move is to transfer the money in your bank accounts to a loved one’s accounts (or remove your name from joint accounts, or transfer property into someone else’s name), this can have severe consequences. For one, when the court looks into your finances, they will see the withdrawal or the transfer. So, you’re not going to fool anyone. And worse, it could lead to charges of bankruptcy fraud. Instead, work with your attorney to determine the best course to preserve as many of your assets as possible. Your lawyer can try to mark some property as exempt to help you legally keep your assets.


Don’t Pay Some Creditors and Not Others

When assessing your finances and before filing for Chapter 7 bankruptcy, you might be tempted to pay off large sums on certain debts – especially if you owe money to a mom-and-pop shop or another business where you are friendly with the owners. However, paying off some debts while ignoring others (known as preferential transfers) can negatively affect your bankruptcy case and result in a lawsuit. 


Don’t Make Large Purchases On Your Credit Cards

When you know that your credit card debt will likely be discharged through Chapter 7 bankruptcy, you might think – shopping spree! Unfortunately, this can wreck your bankruptcy case. The court and creditors will be aware that you made the purchases without intending to pay for them. However, this doesn’t mean you cannot use your credit cards. You can still use your cards to make normal purchases – like groceries, or everyday essentials. 


Don’t Deposit Non-Regular Payments Into Your Accounts

Did you receive a monetary gift, or a financial award shortly before filing for bankruptcy? You should not deposit this into your accounts as it can complicate your Chapter 7 bankruptcy proceedings. Having this money in your account can impact your means test – which is a test you must take to prove your income is below a certain threshold and you cannot afford to repay your debt. If you don’t pass this, you may need to file for Chapter 13 bankruptcy instead of Chapter 7.


Don’t File a Lawsuit Before Filing For Bankruptcy

If you are going to sue someone, you should avoid doing it before filing for Chapter 7 bankruptcy. The court will consider all legal claims as assets in your case. Even if the case hasn’t been resolved and you have not yet been awarded any money, the claims will be considered property of the bankruptcy estate. If you have a pending lawsuit, make sure you consult your bankruptcy attorney before filing or suing another party.


Don’t File If You’re Expecting Financial Payments

Are you expecting payments from work – like a bonus – or other parties, but they’re not yet in your accounts? These will be part of your bankruptcy estate, and the court can take the payments to use towards paying your creditors. If you are expecting future payments, make sure to talk to your bankruptcy attorney about how to handle the incoming money to protect it from your bankruptcy estate. 


Contact an Attorney

Are you considering filing for Chapter 7 bankruptcy? If so, it’s crucial to hire an experienced attorney to help you through the process, determine what you can and cannot do, and get the money you are owed. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.

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