Filing for bankruptcy can bring a wide array of benefits. California residents who seek this form of financial protection can eliminate certain types of consumer debt, regain their financial footing and have the chance for a fresh financial start. When preparing to file for personal bankruptcy, however, it is important to avoid any action that could be viewed as fraudulent by the court.
An example lies in making any unusual financial transactions. This could be as simple as paying back a personal loan made by a family member, with the intent of making good on that debt before the bankruptcy begins. From the perspective of the court, such an act, even though it may be based in the best possible intentions, constitutes favoring one creditor over another. The result could be a lawsuit for the purpose of regaining those assets.
Another example is taking on new debt just prior to filing for bankruptcy. It would be easy for a creditor to make the claim that new purchases were made with the express purpose of having those obligations discharged within the bankruptcy filing. The end result could be that newly acquired debt is deemed ineligible for discharge, and it will still be present once the proceeding is complete.
When seeking personal bankruptcy protection, California residents must make careful choices in the months leading up to the initiation of that process. It can be helpful to frame these matters based on how certain choices might look from the perspective of the bankruptcy court. In the case of any confusion or uncertainty, the best course of action is to discuss the matter with one's bankruptcy attorney.
Source: The Huffington Post, "Here Is Exactly Why People Who File Bankruptcy Are Smart", Steve Rhode, June 30, 2015