Avoiding Concerns about the Fraudulent Use of Credit before a Bankruptcy Filing
Unmanageable credit card debt commonly contributes to a decision to seek protection under the bankruptcy laws. Because credit card debt is an unsecured obligation, you can permanently discharge credit card bills under Chapter 7. You must be careful, though, that you don’t engage in activity prior to your bankruptcy filing that may be construed as fraud. If there’s evidence that you incurred credit card debt knowing that you planned to discharge the debt in bankruptcy, that can be considered fraud. At a minimum, your bankruptcy petition may be disallowed. There could, however, be more serious consequences.
As a practical matter, it’s extremely difficult for a credit card company to show that you engaged in fraud. There would need to be some evidence that you were planning or considering filing for bankruptcy when you charged items. There are, though, actions that the bankruptcy court will carefully examine when assessing whether you engaged in bankruptcy/credit card fraud:
- Luxury purchases within 90 days of your bankruptcy petition — So-called luxury purchases in excess of $600 within three months prior to your petition will be subject to greater scrutiny. This includes any item not “reasonably necessary” to support you and your dependents. Food, shelter and utilities, for example, would generally not be considered luxury items. Jewelry, electronics, vacations, vehicles and designer clothes generally would be luxury items.
- Cash advances taken within 70 days of filing — Such advances over $925 will be presumed not to be dischargeable. Accordingly, you must provide evidence that you intend to repay the cash advance.
Contact Our Offices
At the Law Office of Andrew B. Finberg, LLC, we bring comprehensive bankruptcy counsel to individuals in Burlington, Camden and Gloucester counties in New Jersey. To schedule an appointment, call our office at 856-988-9055 (toll-free at 866-721-7269) or contact us online.