The number one rule of bankruptcy is full disclosure. In exchange for an honest and open look into your financial world, the system relieves you of debt. In preparing for bankruptcy you should also avoid any fraudulent transfers or running up of debt. In a Chapter 7 liquidation bankruptcy, the Bankruptcy Trustee will examine all of your purchases and financial transactions right before your filing. If the Trustee determines you fraudulently ran up debt or fraudulently transferred property without a valid explanation, you could lose your discharge. In certain circumstances, the Bankruptcy Trustee can also reclaim the property from the person to whom it was fraudulently transferred. As a general rule, avoid transfers within 90 days prior to filing for bankruptcy protection. Transfers made up to one year prior to a bankruptcy filing can be cancelled if they were made to insiders such as relatives, general partners or officers of the debtor and the Bankruptcy Trustee determines that the transfer was intended to hinder, delay, or defraud a creditor.

Although you may think you have the perfect plan, the Bankruptcy Trustee has seen every trick in the book and will know where to look. Remember, you can only file for Chapter 7 bankruptcy once every eight years. If you are denied a discharge, you will have to wait four years before you can file for Chapter 13 Bankruptcy protection. In the meantime, your creditors will likely cause you more financial pain than you were attempting to avoid with the fraudulent transactions.