Filing for personal bankruptcy is a significant decision that comes with many considerations. In Texas, it’s important to understand the implications of your financial actions before filing, especially when it comes to spending habits.
The risks of a shopping spree
Going on a shopping spree before filing for bankruptcy can have serious consequences. Courts may view this behavior as fraudulent, especially if you incur substantial debt knowing you plan to discharge it through bankruptcy.
Chapter 7 bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling your non-exempt assets to pay off your debts.
If you go on a shopping spree before filing, the court might see these purchases as an attempt to defraud creditors. This could result in the courts deciding not to discharge those debts, meaning they would still require you \to pay them off after the bankruptcy process.
Chapter 13 bankruptcy
Chapter 13 bankruptcy, or reorganization bankruptcy, allows you to keep your assets while repaying debts through a court-approved plan.
Excessive spending before filing could increase your monthly repayment amount. The court may view your recent spending as an indication that you have more disposable income than you claimed, leading to a less favorable repayment plan.
In both types of bankruptcy, purchases made within 90 days of filing are often closely examined. If deemed fraudulent, these actions can complicate your bankruptcy case and result in severe penalties. Understanding the potential consequences of a shopping spree before filing for bankruptcy can help you make more informed decisions.
