Bankruptcy law is designed to allow debtors relief from burdensome debts, especially when that debt has become burdensome through no fault of the debtor. Sudden and unexpected unemployment, illness, and marital separations are common areas that create problems for debtors. Bankruptcy law is also designed to provide creditors with as much protection as possible. For this reason, every debt is looked at closely by the bankruptcy court, and the debtor will be asked to explain questionable debts.

The most common questionable debts are those that generally surround credit card use, especially when it comes to cash withdrawals. However, credit cards are not the only debts that cause problems. The bankruptcy court will question any debt that has been incurred in the forty days preceding the filing of a petition for bankruptcy. Debts that involve cash payments to the debtor that occur in the twenty day period prior to filing will draw closer attention.

Generally speaking, these debts will not be discharged through the bankruptcy process. The reasoning behind this is that most debtors know when they are under financial stress, so the addition of more debt is considered irresponsible, and could be considered fraudulent. In other words, you know you are going to file for bankruptcy so you get as much as possible beforehand.

If you are considering filing for bankruptcy, immediately stop drawing any further credit, particularly on your credit cards. Every time you make a credit card transaction, you are taking on new credit. If you have made a credit card transaction, wait at least forty days before filing for bankruptcy; however, be warned, if you go on a spending spree two months prior to filing for bankruptcy, that debt may well be classed as questionable as well.

Bankruptcy law does provide protection for debtors – it is also designed to provide protection for creditors. It is the bankruptcy court’s role to balance these two areas so that each side gains the most from the bankruptcy process. The court will check to ensure that debtors and creditors are not acting in a way that gives them an unfair advantage, and for the debtor, one of those checks is their spending habits.

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  4. How Debts Are Discharged In A Chapter 13 Bankruptcy
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