When you file bankruptcy, you’re asking the court to discharge debt, or to arrange a manageable payment plan for you stretched over a period of time. Some of your creditors, on the other hand, would like to prove you’ve committed fraud against them by borrowing money you knew you could not repay. The “stage” on which this drama plays out is called the 341 creditors’ meeting (see my earlier blog, “The Creditors’ Meeting – Be There Or Be Square”).
In deciding whether you qualify for a fresh start, the bankruptcy judge is going to be looking at several things to help him/her make the proper legal decision about your bankruptcy. According to John Caher, legal journalist and co-author of Personal Bankruptcy Laws For Dummies, several “red flags” might bias the opinion against you:
Did you borrow more than $500 on any one credit card within the ninety days preceding your filing bankruptcy? Or, did you take cash advances totaling more than $750 from a single creditor during those same 90 days? Either of these makes it look as if you borrowed with the expectation of never needing to repay the money.
Lots of small charges
Many small charges within a short period of time suggest to the court that you purposely kept each charge low so the merchant would not be likely to check your card. And, if the number of charges in the last month or so before filing bankruptcy is dramatically greater than your normal use of credit, that will work against you as well..
Charges after talking to a bankruptcy attorney
If you charge purchases very shortly after talking to an attorney, it will appear you’d already decided to file bankruptcy and had no intention of paying for those purchases.
In more than twenty years of helping tens of thousands of people through the bankruptcy court process in Indiana, I know that most had no intention of cheating. I also know it’s important for clients not to give the wrong impression to the court.
After the 341 meeting is over, there are three deadlines relating to your bankruptcy filing:
Within ten days, your “means test” will be evaluated and the U.S. Trustee will decide if you’re eligible to file bankruptcy.
Your creditors have thirty days to object to your claims of exempt property.
The sixtieth day is the deadline for creditors to protest discharge of debts
After these three deadlines have passed, you will be that much closer to your fresh start!