The vast number of bankruptcies we deal with are pretty routine. While bankruptcy exemption schedules are exceedingly complex and while it is intensely possible to make big mistakes that cause deep, heart wrenching problems, we don’t tend to see a lot of debtors getting challenged by creditors.
Yet the idea of facing down creditors scares a lot of people, either because they are embarrassed or because they fear their bankruptcy will be stopped in its tracks by some overeager creditor. And while most creditors are only aiming to keep their own debts from being discharged it’s still never a good thing to see one challenging your case. It is possible one creditor could block the discharge of all debts.
While it doesn’t happen often, there are some definite risk factors.
You bought luxury items prior to your bankruptcy.
Credit card companies do look at your account when they get a bankruptcy notice. Did you use your Visa card for a fancy dinner? A hotel reservation? Some cool piece of electronic equipment? Did you spend more than $1,150 on these items less than 60 days before the bankruptcy was filed?
If so, your creditors may argue you already knew you were planning to file for bankruptcy and you never intended to pay for the purchase.
What is a luxury purchase? That word may mean different things to different people. It’s really easy to get into trouble here. Is the purchase of a coffee maker a luxury good? How about a haircut? These purchases may not seem very luxurious at all, but a luxury is anything that isn’t necessary for you to stay alive.
Your best bet? Stop using credit cards altogether a few months before filing for bankruptcy, or use them for basic bills like utility bills and grocery bills only.
You took cash advances on your credit card before the bankruptcy.
Many credit cards offer cash advances, and these can be bad news for bankruptcy filers. Cash advances are treated with even more suspicion. After all, you can buy anything with cash. Creditors are likely to treat this as if you basically stole money from them. Again, in Pennsylvania the amount is $1,150 taken out sixty days in advance.
But we would recommend you avoid any cash advance prior to your bankruptcy. Even a small cash advance could look really bad and could inspire your credit card company to start looking for other reasons to issue a challenge.
You paid off a debt that can’t be discharged with an account that can.
There are plenty of debts that can’t be discharged through bankruptcy. Back child support, for example, or debt you’ve accrued because it is restitution for a crime, such as a DWI. Even paying debts that are now in gray areas, but are rarely discharged, like student loans, can be iffy.
Creditors tend to see this as an attempt to sneak the undischargable debt through the system, and at their expense.
The creditor believes you lied on an application to receive credit.
Lying to receive credit is a form of fraud. It can be difficult to prove, but if a creditor has reason to believe you did it they will issue the challenge.
The most common lie is income inflation. While few card companies will look back to your application if you’ve built up a history of payments with them long before your circumstances turned sour, newer accounts could be in danger of triggering some scrutiny. If you fell prey to temptation and inflated your income on any application because you were desperate to preserve some buying power you should make sure your lawyers know it.
The creditor believes you are hiding assets or committing some other form of bankruptcy fraud.
Creditors are much better at finding hidden assets than debtors give them credit for. It’s never a good idea to try to misrepresent your assets, or to hide them. If you have assets you really want to preserve you should tell us about them so we can do our best to protect them through legal means.
A creditor showed up at your 341 hearing.
Creditors almost never show up at 341 hearings. If they do, they’ve probably seen one or more of the “red flags” above. The questions they’ll be asking are designed to help them decide if they have the grounds to challenge your ability to discharge your debt.
You’re filing pro se.
The vast majority of pro se cases fail to end in a discharge. One reason is pro se filers often make mistakes that can trigger a creditor challenge. Another is they don’t know what to do when a creditor does make that challenge.
Fortunately there’s no reason for you to take on this risk factor. With our free consultations and easy payment plans there’s no reason you should ever have to take on the bankruptcy process alone. As long as you’re honest with us we can help ensure your bankruptcy filing is like most people’s: routine, boring, and without a hint of a creditor in sight.