Why You Should Not Run Up Credit Card Debt Just Before Filing for Bankruptcy

 

Chapter 7 Bankruptcy will often wiped-out your credit card debt. However, some people looking to file bankruptcy are often still living off their credit cards or at least using them regularly. Therefore, our clients ask us, "Why we should not run up our credit cards before filing bankruptcy?" There are numerous basic rules to follow: 

 

Don't buy a jet ski on your credit card right before your bankruptcy

The bankruptcy law says, "Debt is Non-Dischargeable," meaning it would not be wiped out in bankruptcy. So, if the debt incurred under false representations. It may include the fact that you didn't intend to pay the debt when you incurred it. However, the creditor will have to prove that you didn't intend to pay the debt, which is usually an uphill battle for them.

 

This is why the law gets more specific. Purchases greater than $550 made on a credit card for luxury services and goods within the 90 days before filing are presumed to be non-dischargeable. It means that to get them discharged; you will have to prove that the Jet Ski was necessary for the health and welfare of you or your family. That'd have to be one special Jet Ski.

 

Ok, so you can't buy a jet ski, but you can probably buy diapers.

Both Luxury services and goods not defined in the bankruptcy code. However, the law does say that the term doesn't include "services or goods reasonably necessary for the maintenance or support of a dependent of the debtor." Therefore, we can't promise you a judge will think your particular purchases were necessary, I'd guess you'd be able to make a strong argument that medicine, food, diapers, or gas station purchases would normally pass the test.

 

Don't take large cash advances right before your bankruptcy either

Cash advances more than $825 from a single creditor within 70 days before filing bankruptcy presumed no dischargeable. Which is brings up an important point. If you try to avoid the presumption limits (such as taking $824 in cash advances 71 days before filing your bankruptcy case) the a creditor can still try to prove false representations generally, and if you're trying to skirt the presumptions, it may look like you're hiding something and attract unwanted attention from your creditors and the court.

 

Once you file bankruptcy, you won't be able to use your credit cards

We usually recommend that our clients cut up their credit cards and see if they can make their monthly expenses for roughly two to three months before the bankruptcy. Living without credit can be hard after you've become accustomed to it, so it makes sense to get some practice before you file bankruptcy. Questions about non-dischargeability? Don't make these decisions without an experienced bankruptcy attorney.

Avoid holiday debt on your credit card

As you know the holiday season is coming. So when you start to do holiday shopping, then keep the following options in your mind to avoid holiday debt on your credit card this year.

·         1st Option: Plan your holiday shopping and do price comparisons among stores to make sure you get the best deals on the items you want. Also, avoid using credit cards for your holiday shopping whenever possible.

·         2nd Option: If you don't have a household budget, try to prepare one and stick to it. Try to trim your expenses where you can, for example, dropping cable TV, or carpooling to work to save on gas.

·         3rd Option: If you are not behind on payments, you may be able to consolidate your debt or transfer your balance to another card with a lesser interest rate to make your payments more convenient.

·         4th Option: You may be able to get help from a consumer credit counseling the agency, which can negotiate with your creditors to get your payments to a level that's reasonable for you.

·         5th Option: If you have fallen behind and are in collections or facing repossession, foreclosure, eviction, or utility shut-offs as you try to juggle your monthly expenses, you may want to consider talking to a consumer bankruptcy attorney about whether bankruptcy is the right option for you.

 

Conclusion

If looks very hard to follow the above rules and options. Therefore, if you have any questions regarding which options is good for you or any question about non-dischargeability or "filing bankruptcy,." You can hire a professional and expert bankruptcy attorney who will guide you properly. Why it is important because seeking professional consultation can prevent you from the number of completions in the end.