If you are thinking of possibly filing bankruptcy in the near future, you might be wondering whether there are limits on how you can spend your money and on what you can spend it.
The general answer is that you should be careful as to how you spend your money before filing bankruptcy. This article will offer some general guidance on how to spend money so you do not cause a problem with your upcoming NJ bankruptcy.
· You Can Spend Money on Necessities
Before you file bankruptcy you can spend money on things considered to be necessary. These include your regular monthly expenses such as rent, mortgage, utilities, food, basic clothing, child care and car payments.
Please note, you should not pre-pay any of these bills.
· Don’t Spend Money on Luxury Expenses or Goods
You should not spend money on luxury expenses or goods before filing for bankruptcy in NJ. Examples of luxury items would include expensive vacations, jewelry and expensive electronics. Once bought-these items are considered assets in your bankruptcy estate as well. When you incur debt to buy luxury items before filing bankruptcy you also run the risk that these debts will not be eliminated in the bankruptcy.
The bankruptcy law presumes that when you incur debts of $725.00 or more, to a single creditor for luxury goods or services within 90 days before filing a NJ bankruptcy, there is a presumption that the debt is not dischargeable (eliminated).
A cash advance, totaling more than $1,000 taken within 70 days before filing a bankruptcy is also presumed to be non-dischargeable. Therefore it is important to not take cash advances in that time.
Don’t Pay Back Family Members or Friends
Don’t use your money to pay back your friends or family members within one year before filing bankruptcy.
Your parents, siblings, other relatives and close friends are considered “insiders” in bankruptcy law. 11 U.S.C. Section 101(31). Payments to insiders are called preference payments and they are prohibited in bankruptcy. If you repaid your family and friends within one year before filing bankruptcy, the court may “avoid” or reverse the payment as it is considered a preference. They bankruptcy trustee can undo the payment by actually getting back the money from your friends or relatives.
You are of course allowed to pay back your family member (or any creditor of your choosing) after filing bankruptcy. Just don’t do so before hand.
If You’re Planning to File Bankruptcy-Contact Us
If you’re considering filing a NJ bankruptcy, contact us to discuss how to spend your money. Contact the NJ bankruptcy attorneys at Levitt & Slafkes for information on your particular situation.
Contact us at (973) 323-2953 to schedule a free consultation or contact us online.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.