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Do's and Dont's Before Filing for Chapter 7

If you are planning to file for Chapter 7 Bankruptcy, you should follow the rules and guidelines detailed below:

Do Not

1) Give any special preference to a particular creditor. The Bankruptcy law prohibits giving special preferences to a particular creditor at the expense of other creditors. A creditor is not allowed to receive more than his or her "fair share." If you make large payments to a general creditor within 3 months of filing for Bankruptcy, or you make large payments to an "insider," such as a family member or business associate, within one year of filing for Bankruptcy, the Bankruptcy court can require that the money be repaid to the Bankruptcy estate. Regular payments to a secured creditor, however, would not be considered to be a an improper transfer.

2) Purchase any luxury items. You should limit your expenditures to only necessary goods and services. If you purchase luxury items before filing for Bankruptcy, you will remain liable for the debt or will be required to pay the Bankruptcy estate for the amount of the purchase. The purchase of luxury items in anticipation of filing for Bankruptcy can also jeopardize your ability to obtain Bankrutcy relief.

3) Transfer any property to a third party. Some debtors, fearing that they will not be allowed to keep certain property in Bankruptcy, transfer their property to a third party in an effort to put the property out of the reach of creditors. Such a transfer, however, is fraudulent.

4) Use your credit cards. The Bankruptcy law does not allow a debtor to incur additional debt that the debtor does not intend to repay. If you use your credit cards for purchases or cash advances in anticipation of filing for Bankruptcy, the creditor or Bankruptcy Trustee will likely object to your request for Bankruptcy relief.

5) Borrow from your retirement or 401(K) fund. The tax liability for such a withdrawal cannot be discharged in Bankruptcy.


1) Gather all of your bills (for the last 2 months), bank statements (for the last 2 months), pay stubs (for the last 7 months), and tax returns (for the last 2 years). When you meet with your Bankruptcy attorney, you should bring these items to your initial meeting.

2) File any outstanding tax returns.

3) Stay current on your car and house payment, if you intend to keep the property. If you intend to keep your property, your options can vary, depending on your particular circumstances. You should consult with a qualified Bankruptcy attorney to discuss your options in this regard.

4) Obtain a credit report.