If you think filing bankruptcy might make sense for you, the first thing you should do is consult with an experienced bankruptcy attorney. Then, there are a number of thing you should not do.
Do not run up debts in anticipation of bankruptcy
Ever since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), federal law has precluded bankruptcy attorneys from advising their clients to run up debt in advance of declaring bankruptcy.
Congress put this provision in place as part of the abuse prevention part of BAPCPA. It means that your bankruptcy lawyer cannot tell you to go ahead and spend up to the limit on your credit cards because you will discharge that debt in bankruptcy anyway. But that does not mean a bankruptcy attorney cannot help you figure out whether acquiring certain new debts might make sense. Further it does not preclude attorneys from offering advice about whether a bankruptcy judge will interpret new debts as an attempt to take advantage of the bankruptcy system.
Some new debts just reflect good financial planning, regardless of whether you decide to declare bankruptcy soon after:
- Refinancing. You may refinance your mortgage at a lower rate despite impending bankruptcy. In that case, a federal bankruptcy judge would probably not view that sort of new debt as a violation of the letter or the spirit of the law designed to prevent abuse.
- Upgrading a vehicle. You may trade in your old jalopy for a reliable used car and finance part of that purchase. Again, if that car is how you get to work, no bankruptcy judge will view that as an unnecessary luxury or presume that you are taking advantage of the system.
Consult with a Pennsylvania bankruptcy lawyer to find out how bankruptcy judges in your state treat newly acquired debts during a bankruptcy. Your attorney — while not supposed to tell you to spend willy-nilly — will help you determine the advisability of new debts.