Deciding to file for bankruptcy can be difficult. It is a complicated process that requires careful consideration and planning, especially when it comes to spending money. If you are considering bankruptcy, you may be wondering if it’s okay to spend money before filing.
Here’s what you need to know:
When Is It OK To Spend Money Before Bankruptcy?
Generally speaking, it is not a good idea to make large purchases right before filing for bankruptcy. The court will review all of your financial transactions in the months leading up to your filing. If they believe you are trying to hide assets or income by making large purchases, they could disqualify you from filing for Chapter 7 or force you into Chapter 13 instead.
That being said, there are some instances where it is okay to make certain purchases before filing for bankruptcy.
Paying for Necessities
It is important to know that the court understands that people need access to necessities to survive and maintain their quality of life during bankruptcy proceedings. Basic necessities include:
- Groceries
- Housing costs
- Medical expenses
- Any items deemed “necessary”
The court is less likely to consider these purchases a problem than other non-necessity purchases. However, the court handles each situation on a case-by-case basis. Make sure you speak to your attorney about your spending habits and all recent purchases.
What about Gifts and Other Luxuries?
It’s important to note that making large purchases or giving expensive gifts right before filing can lead the court system to believe that you are attempting fraud by hiding assets and income from them. It’s best not to make any luxury purchases before your filing. This includes items such as vacations and expensive jewelry.
This also applies if you plan on using credit cards. Do not buy items with credit cards right before filing as this could be considered fraud, too.
If you plan to file for bankruptcy soon, think carefully about how much money you spend beforehand—especially if the purchase isn’t necessary or if you’re using credit cards or other sources of financing.
Once you have filed for bankruptcy, the court will track your expenses to ensure that no debts are being discharged improperly. The court will review your expenses for some time and compare them to the amounts you reported on your bankruptcy petition. If there is a discrepancy between what was claimed and what is being spent, the court may take action to prevent the debt from being discharged. It is important to keep accurate records of all expenses and receipts to demonstrate that you comply with the court’s requirements.
Additionally, you must be honest and straightforward when discussing your finances with the court during this process.
Is It Ok To Spend Money If I Plan to File for Bankruptcy?
To learn more or to schedule a consultation, contact R. Flay Cabiness, II, P.C. at (912) 417-5041 (Brunswick, GA); (912) 809-2141 (Hazlehurst, GA) or; (912) 324-3176 (Jesup, GA) to schedule a consultation.
