Decided To File For Bankruptcy? Don’t Use Your Credit Cards
As a bankruptcy attorney, perhaps the number one problem I see clients facing is credit card debt. The combination of large balances, high interest rates and exotic late fees has pushed many families to the brink of bankruptcy. There is an obvious correlation between unemployment and problems with credit cards. More and more unemployed Americans are forced to use a credit card as a fallback to float their lifestyle after losing a job. While bankruptcy does provide an effective solution for dealing with credit card debt, there are strings attached. Bankruptcy protection is available for the “honest but unfortunate debtor.” A bankruptcy discharge will not be granted when there is a deliberate attempt to abuse the system.
After meeting with a bankruptcy attorney, you will be aware that after you file your case and receive a discharge, most of your debts will be wiped out. This is powerful and inspiring knowledge. The phone calls will come to an end, the minimum payments won’t be draining your bank accounts any longer, if you were sued and a judgment was obtained…..its gone. Don’t abuse the opportunity by using your credit cards if you have made the decision to file for bankruptcy, to do so is fraud that can jeapordize your right to a fresh start.
Under section 523 of the Bankruptcy Code, non-essential (luxury) credit card debts to any one creditor totaling $500 or more and incurred within 90 days prior to filing are presumed non-dischargeable. Debts incurred at any time prior to filing may not be dischargeable if a creditor can prove that the debt was incurred with no intention to pay. These rules make sense. Going out and buying a flat screen TV on credit two weeks before filing bankruptcy should raise eyebrows. If a creditor notices the purchase, a lawsuit objecting to your entire discharge will likely be filed. The legal fees necessary to defend a lawsuit of this type will far exceed the fee for a typical bankruptcy case. Section 523 goes on to carve out cash advances of over $750 within 70 days before filing as presumably non-dischargeable as well.
If you are currently relying on credit cards to buy the groceries and keep the lights on, it may be a sign that you need to file for bankruptcy. Recent use in good faith does not present a problem, recent use with no intent to pay does. The rule is simple. If you’ve met with a bankruptcy attorney and have decided to move forward with the process, don’t use your credit cards.
