While filing for bankruptcy is a difficult decision to make, sometimes it is the only recourse for deep-rooted and complex financial problems. With the threat of bankruptcy looming, many might think to spend their assets before filing is a no-brainer. Is it, though? Here’s what you need to know about the effects recent purchases can have on a Chapter 7 bankruptcy filing.
What to Know About Recent Purchases and Bankruptcy
When a person thinks about purchasing an expensive item before they file for Chapter 7 bankruptcy protection, there are several things they need to consider before making an unwise purchase. While big-ticket buys are never a good idea before filing for bankruptcy, there are certain times when these purchases may be exempt.
When considering buying an item, a person runs the risk of the purchase not abiding by the following issues:
- The purchase was over the allowable exemption limit of the bankruptcy terms.
- A creditor claiming a debt is nondischargeable because the purchase was made directly before filing for bankruptcy.
Exemption Planning and Chapter 7 Bankruptcy
Some large purchases, such as appliances, may be exempted from seizure by creditors, depending on several factors, including:
- The item’s value
- When it was purchased
- The method of purchase (cash, credit, financing, etc.)
- Bankruptcy exemptions available
If you recently purchased a dishwasher for $1000, for example, but your property only has a partial exemption of $500 for a washing machine, the trustee will sell the dishwasher and return the $500 exemption to you.
One way to help minimize the potential for loss in bankruptcy is to practice exemption planning. Exemption planning is the process of rearranging assets to maximize your exemptions and minimize your losses.
Avoid Excessive Exemption Planning
An excellent way to use exemption planning is to spend excess cash in your bank account of goods such as food, gas, bills, vehicle maintenance, and other exempt purchases before filing for bankruptcy. It is essential, however, to only plan exemptions in both reasonable and good faith. Excessive exemption planning can raise suspicions with trustees that bankruptcy fraud may have occurred, which can lead to serious legal problems.
Contact an Experienced Bankruptcy Attorney Today
If your debts have gotten out of hand and you believe Chapter 7 bankruptcy may be your only financial hope, consult one of the bankruptcy attorney experts at the law offices of Patrick L Cordero P.A. to get the legal representation you need.
We’re proud to be the largest bankruptcy law firm Florida and offer personalized attention to every client. We understand that each situation is unique; that’s why we work with you to get you the results you need. If you’re considering bankruptcy, having an experienced attorney on your side is crucial.
Trust the Minority Lawyer of the Year, and Lawyer of the Decade and we’ll work to get you the best possible financial outcome. Trust in the expert legal team at The Law Offices of Patrick L. Cordero to help you. Call for a free, no-risk consultation today at (305) 445-4855.