Could big spending before bankruptcy cause problems?

Submitted by ireallyseeyou_… on Tue, 02/17/2009 - 19:41

My fiance's mother wants to file bankruptcy because she has amassed too much credit card debt and her husband was laid off. She also has a second home, and the rent she's collecting no longer covers the mortgage on that property. Since considering bankruptcy (at the advice of a financially irresponsible relative also considering filing), she has been spending money like there's no tomorrow. She bought a ton of electronics and furniture on her credit cards, and since she has not spoken to a lawyer (and is getting all of her information on the bankruptcy process from this relative, who seems to think you can buy whatever you want and then have the slate wiped clean), she thinks she won't have to pay for these items after she files and that she'll get to keep them.

Additionally, my research has shown that, during the court process, they evaluate your income (through your tax returns), but both she and her husband have been working under the table since he was laid off. Will the court question how they've paid for anything the past few months? Could it lead to a tax audit? What are the possible repercussions of filing and her outrageous spending spree?

Well the first problem will be that the court will only include the items that were bouight six months ago. Second she will have to show income and yest the courts could decide to find out where it is coming from.

This is by no means legal advice. You should consult an attorney for that.

Thu, 02/19/2009 - 15:01 Permalink

It is illegal to use the credit card in such a manner when she has decided to file bankruptcy. Filing bankruptcy is not easy and she has to undergo a credit counseling program within 180 days of filing bankruptcy, where she may face problem and her bankruptcy petition may be dismissed.
Since she has used her credit card to make these purchases, she will definitely face problem and may fall under tax audit. In order to file bankruptcy, one needs to be an honest debtor.

Wed, 02/25/2009 - 13:10 Permalink
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