What not to do Before Filing Bankruptcy in Atlanta, Georgia

If you are considering filing bankruptcy in Atlanta, Georgia, consider the following to ensure that your bankruptcy case proceeds smoothly and successfully and that you are able to protect and keep all of your property in bankruptcy.

Whether you file a Chapter 7 or a Chapter 13 in Atlanta, Georgia, you want to avoid the following before you file bankruptcy:

  1. Incurring new debt: if you are planning on filing bankruptcy, you should not incur any new debt because such an act could constitute bad faith. Specifically, bankruptcy laws adopted by Georgia provide that any charge of $600 or more on luxury goods within 90 days or cash advances totaling more than $875 within 70 days before a bankruptcy filing are presumed to be non-dischargeable (See Bankruptcy Code 11 U.S.C. Section 523(a)(2)(C)(i)(I-II)).

  2. Large payments to creditors, especially “insiders,” which include relatives or business partners: Making large payments to regular creditors ($600 or more) within 90 days or to insiders within a year of filing bankruptcy or could pose a problem in your case because such payments could be considered transfers subject to reversal in a process known as avoidance actions. The bankruptcy trustee can file an action to unravel the payments and recover the money for the benefit of all the creditors based on the premise that all creditors should be treated equally; payments to some creditors and not others are known as preference payments.

  3. Transfers or sale of property: You should not transfer or sell property for less than fair market value within two years before filing bankruptcy in Georgia. Although this sounds like a difficult rule to follow, the essential meaning is do not transfer any property without receiving fair market value for the property. For example, if you owned a car outright and transferred it to your mother for one dollar, that would be a fraudulent transfer subject to reversal by the bankrutpcy trustee. On the other hand, a transfer that arises out of the normal courts of business, such as a trade in or sale of a vehicle to a dealership would probably be okay. If you think you can put something of value in someone else’s name to avoid losing property in bankruptcy, you are wrong, so don’t do it.

  4. Liquidation of 401(k) or other retirement accounts: Do not liquidate any retirement funds before filing bankruptcy. The liquidated funds must be counted as income on the bankruptcy means test, which may cause you to not qualify for Chapter 7 or have to pay a higher percentage back to unsecured creditors in a Chapter 13. Also, having a lump sum of cash that is not held in a retirement account could subject your money to taking by the bankruptcy trustee. On the other hand, unliquidated retirement accounts are fully protected from taking in bankruptcy in Georgia.

The precautions above are not an exhaustive list of no-nos for filing bankruptcy, but cover some major issues that could complicate a bankruptcy filing. For a consultation regarding Chapter 7 or Chapter 13 in Georgia, call the Law Offices of Charles Clapp at (404) 585-0040 for a free consultation.