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Could spending money land you in trouble during Chapter 7?

On Behalf of | Jun 24, 2021 | Bankruptcy

Facing financial struggles is not any easy situation to deal with. Many Arkansas residents may feel as if their money problems are only getting worse no matter how hard they try to improve their circumstances. After a time, some may choose to move forward with Chapter 7 bankruptcy in hopes of getting a fresh start. However, it is important to continue paying attention to spending before and after filing.

In some cases, it may cross some parties’ minds to spend more money, especially on their credit cards, after filing for Chapter 7. They may think that since they are working toward debt forgiveness anyway that adding a little more to their outstanding balances might not hurt. However, the court will closely assess a bankruptcy applicant’s spending habits, and frivolous charges after filing for bankruptcy could be considered fraud in the eyes of the court.

While this does not necessarily mean that a person cannot spend any money after filing for bankruptcy, it is wise to avoid the following actions:

  • Making significant purchases
  • Using credit cards to make purchases
  • Paying back friends, family members or even creditors after filing

Though repaying a friend or even trying to address a credit balance after filing for Chapter 7 bankruptcy may seem like a good thing to do, it could throw off a person’s case. In turn, the court could decide to throw out the case altogether, leaving the petitioner back where he or she started. Because filing for debt relief and following the law can be complicated, Arkansas residents who believe bankruptcy could be right for them may want to consider having legal professionals on their team.