Filing for Chapter 7 bankruptcy is a life-altering event. Whether it was a mountain of medical debt or unrestrained credit card spending that got you into such a tight financial fix, filing for Chapter 7 bankruptcy can put you back onto solid financial footing.
But there are pitfalls that you can fall into if you do not follow the letter of the law when it comes to the bankruptcy court’s rules. Failing to abide by the law could get you charged with bankruptcy fraud — a serious offense.
What constitutes bankruptcy fraud?
While the following list is not all-inclusive, below are some common ways that Chapter 7 bankruptcy filers can get themselves into trouble.
- Making false statements: Lying to the court or the court-appointed trustee or making misstatements on the bankruptcy petition is a disaster waiting to happen.
- Concealing assets: Low-balling the value of your assets or resources is illegal.
- Transferring of assets: Never liquidate assets, hide cash, or transfer property to others to keep it from being seized and sold.
Courts also frown on serial bankruptcy filers who repeatedly take on debt that they then seek to discharge through Chapter 7 bankruptcy.
How to avoid these legal problems
Knowledge is power. Going into a serious situation like a Chapter 7 bankruptcy requires knowing the ins and outs of very complex, often-changing federal bankruptcy codes. Learning more about your legal options can help you make the right decisions when filing your Chapter 7 petition with the court.
Avoiding any complications with your bankruptcy case will allow you to emerge from this financial crisis better poised to build a stronger financial future.