What Can You Not Do After Filing for Bankruptcy?

When you decide to file for bankruptcy, your finances and assets are in a very sensitive state. It’s important to understand what not to do while filing for bankruptcy to avoid any chance of getting your discharge of debts denied.   

Increase Credit Debt

Once you file for either Chapter 7 or Chapter 13 bankruptcy, you should avoid increasing your credit card debt. A bankruptcy trustee will be reviewing your financial activity during this time, including how much credit card debt you have. If you take on more credit card debt after filing, it raises questions about whether you have intentions of clearing your debt for good. 

Debts you incur after filing for bankruptcy are not included in your bankruptcy discharge or repayment plan. Any new charges you make will be entirely your responsibility to pay back. If you are in serious need of financial relief before the bankruptcy filing is approved, consult with your attorney to determine what options you have available. 

Open New Accounts

In Pennsylvania, you are allowed to open new accounts while your bankruptcy proceedings are still going on. The trouble comes with opening new credit card accounts or applying for a new loan. While technically allowed, it is highly discouraged to take on more debt while in the midst of trying to get rid of your other debt through bankruptcy. New debts will not be counted towards your bankruptcy discharge or repayment plan. In addition, opening a new credit card account can hurt your credit score even further.  In a Chapter 13, the opening of new debt requires a motion to incur debt and court approval.   

Sell Off or Transfer Non-Exempt Assets

Selling off or transferring non-exempt assets during bankruptcy is considered fraudulent. The trustee must approve selling or transferring any non-exempt assets that could be used to pay back debt. Beyond a bankruptcy dismissal, you could face potential criminal charges if you sell off assets that are part of the bankruptcy estate.   

Debtors have the option in Pennsylvania to choose between Pennsylvania property exemptions or federal exemptions. Anything outside of those assets are considered to belong to the estate. In the case of bankruptcy, it is up to the bankruptcy trustee to control non-exempt assets.  An attorney should be able to properly exempt your assets that provides you maximum protections.

Miss Payments on Chapter 13 Bankruptcy

Missed payments on a Chapter 13 repayment plan can lead to a dismissal of the case. A bankruptcy dismissal means that you also lose the protections allowed to you through the automatic stay during the filing process. Your creditors will be able continue collection actions once the automatic stay is lifted. 

Refinance Property Without Permission

Refinancing your property during an active bankruptcy case, whether Chapter 7 or Chapter 13, requires court approval. Consult with your attorney as to whether or not this may be an option for you if you are struggling to keep up with the payments of your home. 

Without permission, refinancing your property could lead to a bankruptcy dismissal. It shows that a debtor is not acting out of good faith to pay off their debts. 

File for Bankruptcy Again Too Soon

Bankruptcy is not something you can file for repeatedly without any waiting period between cases. Federal law imposes strict time limits on how soon you can receive a discharge after a prior discharge in another case. If you received a Chapter 7 discharge, you must wait eight years before you can file Chapter 7 again and receive another discharge. If you want to file Chapter 13 after a Chapter 7 discharge, the waiting period is four years. A Chapter 13 discharge must be followed by a two-year wait before another Chapter 13 discharge can be granted, and a six-year wait applies before a Chapter 7 discharge can follow.  Importantly, the time periods are measured from filing date to filing date. 

Filing too soon will not necessarily get your case dismissed outright, but you will not be eligible for a discharge of debts, which eliminates much of the benefit. The automatic stay may also be limited or absent if you have had a prior case dismissed within the past year.  If you have had two cases within the past year, there is no stay imposed at all unless you specifically ask the court to impose a stay.  Courts take serial filings seriously, and if there is any appearance that you are filing in bad faith to manipulate the system, the bankruptcy rules and judges limit your remedies.  

If you have questions about your situation, contact RQP law at (610) 323-5300 for a consultation.