Can Incurring New Debt Help You in a Chapter 7 Bankruptcy?

The bankruptcy laws changed about a decade ago, making them more restrictive and requiring those who file for bankruptcy to satisfy additional requirements. There is a perception by some that incurring more debt prior to filing for Chapter 7 can be to their benefit, but your Bryan bankruptcy lawyers will adamantly tell you that this is false.

What Happens When You Incur More Debt

Before changes were made to the Bankruptcy Code, it might have been possible to charge up more debt before filing Chapter 7 and get away with it. This is not the case today. In fact, if your bankruptcy has already begun, these new debts will not be included, and therefore not discharged. This means you will be liable to repay them without the safety net of bankruptcy to protect you.

It is also a bad idea to run up new debt within 90 days of filing for Chapter 7. This is especially true if you make a substantial purchase on credit. The creditor will argue that you made the purchase with the intent to avoid paying through the bankruptcy. This is, indeed, considered a form of fraud.

Specific Types of Loans to Avoid Prior to Filing Chapter 7

You should be very careful about any indebtedness you take on during the three months before filing bankruptcy. Avoid any charges on your credit card in the amount of $600 or more. It is especially dangerous to take out cash advances. Many credit cards offer such cash advances, which generally amount to a portion of the credit extended to you. If you take out cash on your credit cards, this can only look very suspicious.

You should also avoid cashing out a 401(k) or other pension plan or taking a loan against it. Creditors will expect that this money be used to help repay indebtedness before a bankruptcy is granted. The same applies to a home equity line of credit.

Work with an Attorney if You Are Filing Bankruptcy

You may find that it is in your best interests to hire Bryan bankruptcy attorneys to help with your bankruptcy. An attorney can help you avoid pitfalls, such as incurring new debt before filing. Call Peterson Law Group today to arrange a consultation at 979-703-7014 or 936-337-4681.