Handling Three Potential Issues When Filing Chapter 7 Bankruptcy

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You may run into one of these three issues when filing chapter 7 bankruptcy. There are ways to handle each one so your bankruptcy can be successfully discharged.

1. Nuisance Filing on Your Record

If you filed bankruptcy twice in one year but the first time your case was dismissed because you failed to do all the requirements (such as completing the credit counseling class), when you file the second time a judge could lift the automatic stay within 30 days on your creditors. This is to discourage people from filing merely to avoid something like being evicted or having their wages garnished, when they have no intention of following through with the bankruptcy.

To avoid this issue, you should wait a full year before filing again and carry it through to discharge. If you need to go on and file, your lawyer will need to file a motion to get the stay extended and you will need to convince the court of your good faith.

2. Consumer Credit "Fraud"

Naturally a credit card company or a store that has issued you a charge account is going to look askance on your buying a new flat screen TV on credit two weeks before declaring bankruptcy. A credit card company/business may challenge the discharge of your debt with them if:

  • You lied about your income to get the credit card or to get a higher credit limit.
  • You purchased big items or services, or took large cash advances, within 90 days of filing.
  • You increased the amount of borrowing or purchasing with your card/account even if the individual amounts were small.

The card company/business can file an adversary proceeding action against you because it would appear you didn't have good intentions towards them and had no intention of paying the debt you were accruing.

Knowing this, you may need to delay filing for at least 3 months if you have been using your credit a lot in the recent past, or you could consider switching to a chapter 13 bankruptcy.

3. Need to Amend Your Petition

If you forgot to include a debt with your original creditor mailing list and your petition has already been filed, you will need to inform your attorney right away. Your petition will need to be amended and you may have to pay an additional fee for this. To avoid this problem, it would be helpful to get a copy of your credit report to use as a reference when filling out your forms.

Correcting any omissions is necessary so that you can avoid appearing dishonest about your intentions, and you will also want this debt to be properly discharged with your bankruptcy. If your bankruptcy has already been discharged, some courts will allow your case to be reopened and your papers to be amended, when a creditor is still trying to collect from you.

Other types of amendments that may need to be made before discharge include:

  • Adding or deleting an asset you claimed or want to claim as exempt
  • Adding or deleting property you received or lost as result of divorce, inherited, or received in an insurance settlement.
  • Changing your intention towards a secured asset, such as working out a loan modification to keep your car, or to cancel an arrangement and give the car up.
  • Needing to add a payment that you made on a debt, which was not recorded on your petition.

To summarize...

You should: wait a year before filing if your bankruptcy was dismissed, quit using credit cards and store accounts at least three months before filing, and inform your lawyer promptly of any necessary amendments. These things will go a long way in assuring the bankruptcy court of your good faith. To learn more, contact a professional such as Michael Hart D PC with any questions or concerns you have.