Learning About Bankruptcy Proceedings

4 Financial Moves You Shouldn't Make While Completing A Bankruptcy

by Seth Beck

If you're currently undergoing a bankruptcy or considering one, there are a few financial moves that you should avoid. Your entire financial history will be under intense scrutiny throughout the process and there are certain things that could be considered red flags. 

1. Selling Any Large Assets to Anyone You Know

When you're declaring bankruptcy, you're often in a tight financial situation. You may feel as though you need to sell an item for money and it may be more convenient to sell the item to a friend or family member. But this can be complicated when you're going through bankruptcy because the bankruptcy court may see it as simply trading your items away so that you can get them back later. If you do need to sell an item to a friend or family member, you should discuss it with your attorney, and you need to get a fair price for it.

2. Acquiring Any Additional Credit Lines

It may seem as though now is the best possible time to acquire new credit, but it's actually a bad idea. Usually -- with rare exception -- any debts accrued within the last six months will be excluded from your bankruptcy proceedings. So if you open up any new lines of credit, you'll be harming yourself in the future. There may be some exceptions for medical debts or other unavoidable debts. 

3. Going Through a Divorce

You should usually go through a divorce either before or after a bankruptcy, not during a bankruptcy. Though a divorce may seem like a relationship decision, it's also a legal and financial decision. It could significantly complicate the entire process of the bankruptcy and result in the bankruptcy not helping you or your ex-spouse as much as it otherwise could. 

4. Giving Away Any Cash or Items

Don't give away anything of value during your bankruptcy proceedings. It can be tempting to try to keep items that have sentimental value, but it's really not necessary; you will usually be allowed to keep a certain amount of items, and items that you have an attachment to count. You simply need to list them against the amount that you are allowed to keep.

Your bankruptcy attorney can tell you more about what you should avoid while undergoing a bankruptcy. Though you can file a bankruptcy without an attorney, an attorney will almost always be able to ease the process and improve your financial situation long-term. For more information, contact Sever Law Office or a similar firm.