If you are thinking about declaring bankruptcy, paying off some of your smaller, more manageable debts may seem like the right thing to do. After all, when you assumed the debt, it was under the agreement that you would pay it off someday. If you file fairly soon after paying back one or more preferential lenders, though, complications could arise that ultimately delay the proceedings. Bankruptcy law states that if you accumulate more debt shortly before filing, you could face fraud charges. Take a look at how to manage debt effectively prior to filing.

Paying off Debt

At the end of the day, the court does not want to see that borrowers have favored particular lenders, which is why paying off some debts shortly before filing is a bad idea. There are dozens of reasons why someone might want to keep certain debts out of bankruptcy law proceedings; maybe you owe money to a family member, or maybe you want to hide the filing from a favorite financial institution to retain accounts there.

If you pay off any debts less than 90 days before filing, though, the bankruptcy trustee can sue the recipient to recover the funds and redistribute them among creditors. You can, however, continue making any regular payments, as long as they do not exceed the amount you usually pay each lender on a monthly basis.

Accumulating More Debt

Accumulating a considerable amount of debt just before filing can also be considered fraud under bankruptcy law. In general, it is wise to stop using credit cards altogether as soon as you make the decision to file. If cash flow is low, though, you may be relying on certain revolving accounts to cover the necessities. As long as you do not spend more than $675 on luxury items within three months of filing or obtain more than $950 in cash advances within 70 days, you are unlikely to face accusations of fraud.

If you are in over your head financially and want to discharge applicable debts, turn to Ray T. Kennington, Attorney At Law. Based in Ozark, AL, this bankruptcy law attorney is proud to provide unparalleled legal advice to clients who want to regain their financial footing. His firm also helps clients resolve cases that fall under family law, personal injury law, and Social Security law. You can schedule an initial consultation by visiting his website or by calling (334) 445-1200.