Three Common Utah Chapter 7 Bankruptcy Mistakes

Bankruptcy Court

These are three of the most common mistakes I see right before someone goes in bankruptcy court:

1. Making A Preference Payment

If you owe on credit cards or medical debt and instead of paying that debt you pay on a past-due debt to family within 1 year of filing bankruptcy, that is a preference payment. The bankruptcy judge can take that money back from your family member and give it to your other creditors. For ordinary (non family) creditors it is within 90 days of filing bankruptcy.  On-time payments in the ordinary course of business are fine.

2. Transferring Property
Don’t transfer property, transfer the title of your truck to your brother-in-law etc., right before you file bankruptcy. Don’t sell property for less than fair market value. The bankruptcy judge has the power to reverse these transfers.

3. Loading Up On Debt
Once you know you can not repay your debt, it is fraudulent to continue to acquire new debt. So don’t do it.  Don’t do any cash advances, check loans or balance transfers. It is best to stop using credit cards entirely once you know you are going to have to file bankruptcy. There is a presumption that charges made within 90 days of filing are fraudulent and those may have to be repaid.

As I always say to my clients does it pass the smell test?  If it smells bad don’t do it and always contact an experienced Utah bankruptcy attorney before you make any questionable payments or transfers of your stuff.