Can I Buy Things When I File for Bankruptcy?

Facing financial difficulties can be overwhelming, and for residents of California, understanding the implications of bankruptcy is crucial. In this blog post, we'll explore the relationship between buying habits and bankruptcy in California, shedding light on responsible spending practices to help you make informed decisions. While filing for bankruptcy is a difficult decision to make, sometimes it is the only recourse for deep-rooted and complex financial problems. With the threat of bankruptcy looming, many might think to spend their assets before filing is a no-brainer. Is it, though?  Here’s what you need to know about the effects recent purchases can have on a Chapter 7 or 13 bankruptcy filing.

What to Know About Recent Purchases and Bankruptcy

When a person thinks about purchasing an expensive item before they file for Chapter 7 bankruptcy or a Chapter 13 protection, there are several things they need to consider beforehand.

Navigating bankruptcy in California requires expert advice. A bankruptcy attorney can provide invaluable insights into the legal nuances, ensuring you make informed decisions about your financial future making an unwise purchase. While big-ticket buys are never a good idea before filing for bankruptcy, there are certain times when these purchases may be exempt.

Certain purchases made before filing for bankruptcy may be scrutinized, especially if they involve significant assets or high-value items. Large, non-essential purchases close to the filing date might be considered fraudulent or irresponsible behavior.

When considering buying an item, a person runs the risk relating to these issues:

• The purchase was over the allowable exemption limit of the bankruptcy terms.

• A creditor claiming a debt is nondischargeable because the purchase was made directly before filing for bankruptcy

• Was the purchase considered, “reasonable”

Exemption Planning and Chapter 7 & 13 Bankruptcy

Some large purchases, such as appliances, may be exempted from seizure by creditors, depending on several factors, including:

• The item’s value

• When it was purchased

• The method of purchase (cash, credit, financing, etc.)

• Bankruptcy exemptions available

If you recently purchased a dishwasher for $1000, for example, but your property only has a partial exemption of $500 for a washing machine, the trustee will sell the dishwasher and return the $500 exemption to you.

One way to help minimize the potential for loss in bankruptcy is to practice exemption planning. Exemption planning is the process of rearranging assets to maximize your exemptions and minimize your losses.

Avoid Excessive Exemption Planning

One of the key factors contributing to bankruptcy is irresponsible spending. Be mindful of your purchasing habits, distinguishing between essential and non-essential expenses. Creating a budget and sticking to it can significantly impact your financial stability. An excellent way to use exemption planning is to spend excess cash in your bank account of goods such as food, gas, bills, vehicle maintenance, and other exempt purchases before filing for bankruptcy. It is essential, however, to only plan exemptions in both reasonable and good faith. Excessive exemption planning can raise suspicions with trustees that bankruptcy fraud may have occurred,  which can lead to serious legal problems.

If You’re in a Chapter 13, You May Purchase a Car

There are a few factors to consider when purchasing a car during your chapter 13 case. You may need to file the appropriate Motion(s) to gain Court approval and also resolve any concerns by the Trustee. The car must be reasonable (No G-Wagons or Ferraris) with reasonable contractual terms to allow you to continue to succeed with your case.

Recent Purchases

In a bankruptcy proceeding, recent purchases made shortly before filing for bankruptcy can be subject to scrutiny. If a debtor incurs significant debts or makes substantial purchases just before filing, it may raise concerns about potential abuse or fraudulent activity. Here are a few key points to consider:

1. **Preference Period:** The bankruptcy court may examine transactions made during a specific period leading up to the bankruptcy filing. This period is known as the preference period, and it typically covers the 90 days before filing for individuals.

2. **Fraudulent Conveyance:** If a debtor makes purchases with the intent to defraud creditors or hide assets, it could be considered a fraudulent conveyance. The bankruptcy trustee has the authority to undo such transactions.

3. **Luxury Goods and Cash Advances:** There are specific rules regarding luxury goods and cash advances before filing for bankruptcy. If a debtor incurs debts for luxury items or cash advances totaling more than a certain amount within a specified period before filing, those debts may not be dischargeable.

It's essential for individuals considering bankruptcy to be transparent about recent financial transactions and to seek legal advice. Disclosing all relevant information to the bankruptcy court and working with a bankruptcy attorney can help navigate the process smoothly and ensure compliance with bankruptcy laws. Failure to disclose recent purchases or engaging in fraudulent activities may have serious consequences, including the denial of a bankruptcy discharge or other legal penalties.

Contact an Experienced Bankruptcy Attorney Today

California has specific bankruptcy laws that residents must navigate. Chapter 7 and Chapter 13 bankruptcies are common options, each with its own eligibility criteria and implications. Consult with a qualified bankruptcy attorney to explore the best course of action based on your unique circumstances.

If your debts have gotten out of hand and you believe Chapter 7 or Chapter 13 bankruptcy may be your only financial hope, consult one of the bankruptcy attorneys at the law offices of Bankruptcy Near Me, LLC to get the legal representation you want.

We’re proud to offer personalized attention to every client. We understand that each situation is unique; that’s why we work with you to get you the results you need.  If you’re considering bankruptcy, having an experienced attorney on your side is crucial.

We’ll work to get you the best possible financial outcome.  Trust in the expert legal team at The Law Offices of Bankruptcy Near Me, LLC to help you. Call for a complementary consultation today at 301-550-5408.

Bankruptcy in California is a complex process that demands careful consideration of your financial choices. Responsible spending practices play a crucial role in avoiding financial pitfalls. By assessing your situation, understanding the local bankruptcy laws, and seeking professional guidance, you can make informed decisions to regain control of your financial well-being.