How to Mess Up Your Chapter 7 Bankruptcy: Part 2
Posted on Tuesday, July 21st, 2015
We continue to dispense little bits of insight regarding what not to do before you file a Chapter 7 bankruptcy or a Chapter 13 Bankruptcy. One action we’ve seen people take prior to filing bankruptcy is to pay off their car entirely. There are so many myths about bankruptcy that people rely on before consulting with an attorney. Some people out there follow their intuition on some matters and it really gets them in trouble.
Your imagination: “I’ve got a nice Audi that I desperately want to keep even though I know I am about to file bankruptcy. This Audi has a value of, let’s say $13,000. I owe $8,500. I know I’m filing bankruptcy and I want to keep my car. Let’s make sure I can keep it by withdrawing enough money from my retirement account and paying it off in full. Great idea!”
Reality: You are going to cause serious problems in your effort to get financial relief through bankruptcy by choosing to pay off your car in full before you file your case. The first thing you will do is create an asset that can be difficult to protect and easy to sell. Depending on your other assets, the Bankruptcy Code may not allow you to keep this car.
The second thing you will have done with this plan is that you will lose an important expense. All of a sudden, you no longer have a car payment. There are two places in your petition where this really hurts you. The bankruptcy court will now say you have extra room in your budget and could easily fund a Chapter 13 to pay back more of your creditors.
Planning for Bankruptcy is a good thing to do. Planning by yourself is a not so good thing to do. Call us now at (916) 419-1111.