Filing for Chapter 7 bankruptcy requires answering a lot of questions and filling out a lot of documents. After that, it requires allowing a bankruptcy trustee the opportunity to carefully analyze and review your entire financial picture. As the trustee does this, he or she will take a close look at the balances in your bank accounts and having too much cash could affect your case.
Why cash matters
One thing you will have to report when you file for bankruptcy is the cash you have on hand in the bank, and this will include cash in every bank account that has your name on it. Cash matters in a Chapter 7 case because it is an asset. In Chapter 7 cases, there is always a risk of losing assets you have in exchange for getting debts you owe removed. Cash is the most liquid asset you can have, and the court trustee will need to know exactly how much you have on hand on the date in which you file your case.
The rules with cash
Every state has rules relating to the amount of cash you can have on hand when you file for bankruptcy. Some states allow you to have a lot more cash on hand than other states, and it really all boils down to the asset exemption rules in the state where you live. If your state allows you to exempt cash, your lawyer will tell you the rules about this. If you have more cash on hand than what the law allows, your lawyer might give you some tips to help you spend the cash in a legal way. Otherwise, you risk losing this cash. The trustee could tell you that you must surrender the cash to the court, and you cannot get around this if this happens.
What you can do to prepare
The best thing you can do is learn about the rules relating to cash on hand and then find ways to reduce the amount you have. One thing you should understand is that if you spend the cash on luxury purchases, you could end up facing legal troubles for this as this is against the law. Always follow your lawyer's advice when spending cash on hand to prevent legal issues.
Before you decide to use up any cash you have on hand, it is vital to talk to your bankruptcy lawyer about this. Spending the cash in the wrong ways could jeopardize your case, and you should make sure you avoid this. To learn more about bankruptcy law, talk to a lawyer about this subject or about anything else you have questions about.