As your Austin bankruptcy attorney my goal is help you restart your financial life and look forward to better times ahead. But, part of the process that traps many people is what are called “lookback” periods. These are of varying lengths and apply to financial transactions you have made prior to your filing. Their purpose is to keep people from abusing the bankruptcy code by trying in advance to shuffle around or hide assets that rightfully should be made known to a Trustee and be available to your creditors. If you are entering a Chapter 7 and erasing all allowable debts, you are exposing all your assets beyond certain prescribed exemptions.
I like to understand all your transactions for several years leading up to your filing, even though some lookback periods are only 90 days. Having the complete picture in front of me helps me give you the best outcome. You can read all such rules on the US Courts site, but bankruptcy is a complex field and, in my opinion, case filing should never be a do-it-yourself project.
Here in particular is a list of 7 items that often come to my attention:
1. Cash Advances – If you’ve drawn cash advances or taken out loans within a few months of filing, creditors will presume you have done this in contemplation of bankruptcy and to harm their interests.
2. Balance Transfers – These, too, are similar to cash advances in creating red flags as to their sources and uses.
3. Luxury Purchases – You might be surprised that $500 is considered a luxury purchase under the Bankruptcy Code.
4. Payments to Family Members, Creditors, and Business Partners – You cannot remove assets from your bankruptcy estate by sending money to Aunt Sally to hold, or favoring certain creditors over others, or hoping your business partner can keep assets out of reach.
5. Selling Assets for Less than Fair Market Value (FMV) – If you’ve sold your new paid-off Corvette to your cousin for $100, that’s not acceptable. Perhaps that’s an extreme example, but possessions for which there is a ready and easily quantified market, say gun collections, can’t be sold to a friend for pennies on the dollar with a side deal to buy them back later for those same pennies. Many liquidate assets close in time to filing, often in a last-ditch effort to pay creditors and therefore avoid filing. And, understandably, instant liquidation is often less than FMV; however, your Trustees can closely scrutinize any transaction that occurred within the past 5 years.
6. Selling Your Home – Any real estate transaction in the years prior to filing requires my analysis, even if you’ve gone through a short-sale or foreclosure. If you are currently attempting to sell your home, the timing of the sale can be critical.
7. Handling the IRS and State Income Tax Arrearages – People inadvertently take steps with taxing authorities that cause otherwise dischargeable taxes to remain as liabilities post-bankruptcy.
I rarely meet potential clients who have deliberately tried to skirt the rules and abuse the bankruptcy laws, and I certainly do not condone such practices or agree to represent them. However, I do very often engage clients who have fallen into some of the aforementioned traps. Family events that lead to bankruptcy can often be overwhelming and fast moving. Most people don’t plan for that eventuality and just fight their daily financial battles with no thought as to how their actions may look in the rearview mirror of the lookback periods. I’m here as your Austin bankruptcy lawyer to determine how best to handle any such issues in your best interest and within the scope of the law. There are ready tools at my disposal, especially analyzing the best timing for a filing, and I will use all those tools for your benefit.