Debts
A common temptation among bankruptcy filers is to attempt to reduce debts or increase income prior to submitting. When filing for bankruptcy, the total quantity of debt is crucial because it is a major factor in determining eligibility. Reducing debts prior to filing could preclude a person, leaving them without the necessary protection. Increasing one's income prior to registering could also reduce the likelihood of bankruptcy eligibility, particularly in Chapter 7 cases.
In some instances, individuals incur additional debt prior to registering for bankruptcy. These actions may constitute deceit and result in severe consequences. Even if debts are acquired inadvertently before submitting, they may not be admissible. The bankruptcy laws prohibit the discharge of debts of $600 acquired within 90 days of filing. Cash advances acquired within the preceding 70 days and exceeding $750 may also be disqualified.
Assets
When evaluating a bankruptcy case, the debtor's assets are of the utmost importance. The court employs an inventory of assets to determine eligibility and debt-repayment potential. People frequently sell or give away assets prior to declaring bankruptcy out of fear of losing them to creditors. Not only are these actions potentially fraudulent, but they are also typically unnecessary.
In a Chapter 7 bankruptcy, exemption regulations protect the majority of the debtor's assets. In the majority of cases, a person's home, automobile, personal property, and other assets are exempt from liquidation by creditors. Although it is not strictly forbidden to sell assets before filing for bankruptcy, the debtor must adhere to certain regulations. Any asset sold prior to filing for bankruptcy must be sold for its fair market value, and the proceeds must be disclosed on the bankruptcy petition.
Some individuals choose to liquidate their retirement or investment funds prior to filing for bankruptcy, which creates the same issue as with other assets. The court cannot effectively evaluate a debtor's financial situation without the disclosure of these funds' balances. Additionally, these funds are generally protected by bankruptcy exemption laws.""
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