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How to Mess Up Your Chapter 7 Bankruptcy: Part 1

Posted on Friday, July 17th, 2015    

As far as legal matters go, a Chapter 7 Bankruptcy often times can be a pretty simple one.  There are certain actions you can take prior to filing that can really mess this up.  So we have designed a series of posts that we’re going to share that are meant to highlight some actions that you really don’t want to do.

The first thing I want to talk about is the debts you owe to family and friends.  For some people who fall on hard times, they have been in a situation where they can borrow money from family and friends.  Often times, this is after credit cards have been maxed out and people have reached their financial limit.    When people who owe family and friends decide that Chapter 7 is in their best interest, funny things start to happen.

They get worried about their family and friends and do not want to include them.  The next step, in their minds, is to pay back family and friends before they file so there is nothing to worry about.  While some may feel like this is an appropriate thing to do, it can create serious problems in your Chapter 7 Bankruptcy.

The Bankruptcy Code treats your family the same as it does your credit cards.  Pretend you get a $5,000 tax refund and decide to use it to pay off your daughter who loaned you money last year.  Then you decide to file bankruptcy.  You must disclose this repayment and the Trustee assigned to your case will most likely require that money to be transferred over to him to be distributed to all your creditors evenly.  That is the consequence of picking and choosing family members before filing.  Nothing about Bankruptcy prohibits you from paying back any creditor after you file.  But picking and choosing prior to filing Bankruptcy creates a headache that is not worth it.  Don’t do it.  But do call us at (916) 419-1111.

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