Total Bankruptcy

One of the common misconceptions about bankruptcy is that a debtor can incur large debts in a short period of time before filing bankruptcy, knowing that he'll ultimately file and discharge those debts. There are a variety of reasons that pre-filing debtors should be very cautious about new credit--or using existing credit--and should consult with a bankruptcy attorney before making any credit-related decisions.

For instance, debtors don't always understand the difference between secured and unsecured debt. Often when goods, especially large goods, are purchased on credit, the creditor retains a security interest in those goods. Secured creditors may still be able to seize property after a discharge is entered.

On the other hand, if there is no security interest in the goods, then those goods themselves--unless exempt--may be subject to sale by the trustee in order to pay the debts of the estate.

Finally, many debts incurred within a certain time period before bankruptcy filing are presumed to be non-dischargeable. If a debt is determined to be non-dischargeable, the debtor may be required to pay that debt even after discharge has been granted in the case.

If you're considering bankruptcy and thinking about incurring additional debts, talk to you bankruptcy lawyer in advance to find out what kinds of debt are acceptable pre-filing.