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How to screw up your bankruptcy before it has begun

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Image by S Migol via Flickr

Planning on transferring your largest asset to a relative just before filing for bankruptcy so that the bankruptcy court can’t get to it? As a bankruptcy lawyer, I must say – PLEASE DON’T. It’s a bad idea because it can really get you into trouble and it can deny you your ultimate goal of getting your debts discharged.

The Bankruptcy Code contains a section (727) allowing the Bankruptcy Court to deny a discharge to debtors who transferred, destroyed, or concealed their own property within a year before filing for bankruptcy. Debtors also should not mess around with their property right after filing for bankruptcy – wait until the discharge comes through.

The reason why is that, especially since the 2005 change in the bankruptcy law was enacted, the courts have been cracking down on bankruptcy fraud. The court doesn’t like it when you try to hide assets. They don’t think of your moving your property around to avoid losing it in bankruptcy as ‘innocent,’ even if you do.

In fact, if a debtor does enough things that the court doesn’t like, it may see the entire bankruptcy filing as abusive.

Besides, if you really have assets worth so much that you can’t exempt them from the bankruptcy estate, you may be able to save them by filing a Chapter 13 instead of a Chapter 7. Talk with a lawyer about your options – just don’t transfer any property around before doing so!

In New Jersey and looking at bankruptcy as an option? Call a New Jersey bankruptcy lawyer at 201-676-0722.

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