If you plan on filing for bankruptcy, you need to understand how credit card use can affect your bankruptcy. It is never a good idea to run up credit cards immediately beforehand. While it may be tempting, using your credit cards directly before filing for bankruptcy can lead to complications that include not being able to discharge that portion of your debt.
Generally, credit card debt is dischargeable through filing for bankruptcy. However, fraudulent debt is not. If you run up credit card debt with the intention of discharging it in bankruptcy, it is a fraud against your creditors and they may ask the court not to discharge the debt. You should be especially careful not to charge as much as $600.00 on a single card for luxury items within 90 days prior to filing bankruptcy. Also avoid cash advances on a single credit card of $875.00 or more within 70 day before filing bankruptcy, because in both situations, the court must presume that you incurred the debt fraudulently.
Additionally, some creditors will look at overall credit card usage in the 6 to 12 months prior to filing and object to a discharge if the charges are excessive and appear to be done in contemplation of bankruptcy. So the best practice is not to use any credit cards once you have met with an attorney and/or know you plan to file bankruptcy.
Once you have consulted with an attorney, be sure to inform your them of any purchases of $600 or more that you’ve made on your credit cards because in most instances it may be in your better interest to delay filing until after the 90 day presumption period has passed.
If you purchase necessities like food and diapers on your credit cards within 90 days prior to filing bankruptcy, your credit card company probably will not complain. However, you should stop making charges of all types once you have made the decision to file bankruptcy.
In some cases, it makes sense to incur debt with the intention of filing bankruptcy. For instance, if you car needs to be replaced, it may make sense to finance a dependable replacement vehicle before you file bankruptcy. However, you should always obtain the advice of a bankruptcy attorney before taking any financial steps in contemplation of filing bankruptcy case.
If you are unsure about any purchases you’ve made within the 90 days before you are planning on filing for bankruptcy and are wondering if your credit card debt can be discharged, consult with bankruptcy attorney Gregory J. Wald for more information.
Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Toll Free: 1-866-747-1130