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New Jersey Bankruptcy No-Nos

Important financial moves to avoid in the months leading up to (and after) filing for bankruptcy

On Behalf of Veitengruber Law | May 17,2022

If you are considering filing for a New Jersey bankruptcy, you should know that the court will examine your spending before the filing. Any frivolous or major purchases made just prior to filing for bankruptcy can seem suspicious and might jeopardize your case in court. For this reason, it is advisable to stick to a set budget to cover basic living expenses so you can pay necessary bills on time and avoid adding to your debt. Here are some financial moves to avoid in the months leading up to filing for bankruptcy.

1.  Don't Use Credit Cards

Consistently using credit cards to make purchases and keeping a large balance month-to-month without making payments can look fishy to a bankruptcy court. It can seem like you have no intention of paying off your debt. You don't want to make it easy for a credit card company to argue against discharging your debts. Avoid using your credit cards at all and make every attempt to pay the minimum monthly payment if you plan to file for bankruptcy in the near future.

2.   Don’t Make Large Purchases

If you are filing for Chapter 7 bankruptcy, it is worth it to keep in mind that your nonexempt possessions can be sold to help pay off your debts. If you make big purchases that can be sold, you could end up losing them through bankruptcy anyway. You may also have to provide an explanation for any big purchases to the bankruptcy court. Can you justify spending that money? If the answer is no, hold off on the big purchase for now.

3.   Don't Repay Friends or Family

It may seem counterintuitive, but avoid settling balances with friends or family if you intend to file for bankruptcy anytime soon. These people are considered "insiders" under bankruptcy law. Payments made to these insiders are prohibited during bankruptcy proceedings. Depending on the sum of money you repay, a bankruptcy trustee could end up taking the money back and using it towards other debts in your case. This rule will apply to any payments made within one year of filing for bankruptcy. It is best to wait until after your case is resolved.

4.   Don't Transfer Property

You will need to disclose any property you have transferred in the year before you file. Not doing so can be considered hiding assets. Any transfers made within a year of filing could fall under suspicion and prevent you from successfully filing for bankruptcy.

Keep in mind that even after your case is finalized, you should watch your spending. Courts will review big purchases for up to 90 days after your case is closed. Making big purchases in the few months after your case ends looks fraudulent. If this happens, you could face additional legal penalties and prolong your financial troubles.

If you find yourself considering filing for a New Jersey bankruptcy discharge or reorganization, reach out to Veitengruber Law. We can ensure you are making the best decisions for you leading up to a bankruptcy filing. 



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