Don’t Commit Fraud With Credit Card Use Before Bankruptcy

Spending up to your credit limit on your credit card and then filing bankruptcy and submitting that credit card debt as part of the bankruptcy is a serious crime because it’s intentional and fraudulent. 

If you’re going to file Chapter 7 bankruptcy or Chapter 13 bankruptcy, you submit debts for discharge and list creditors who you owe and the balance. Your credit cards should not be used after speaking with a bankruptcy attorney for any reason. The debt incurred on the card has to be legitimate or the spending will be flagged and you can be charged with fraud.

Winter Park bankruptcy attorney Eric Lanigan and Roddy Lanigan will explain in the first meeting with new clients the do’s and don’ts of bankruptcy. There are basic practices that can be questionable in court. This includes:

  • Inflating or lying about assets
  • Shopping or spending sprees
  • Shopping for expensive items after you consult with an attorney
  • Take a vacation, buy a new wardrobe 
  • Spend over $500 multiple times and then file bankruptcy
  • Spend up to your credit limit in increments under $50
  • Use your credit card when it has been recalled
  • Suddenly buying luxury items
  • Cash withdrawls up to the limit
  • Using the credit card knowing you can’t afford to pay it, i.e., you lost your job
  • Applying for credit and filling the card before filing bankruptcy

Carefully consider credit card use if  you know or are even considering filing bankruptcy. You need to be aware that all of your bank accounts, savings, investment accounts are up for review and intense scrutiny when you file bankruptcy. This applies to Chapter 7 bankruptcy, Chapter 11 bankruptcy, or Chapter 13 bankruptcy.

Debt Can Survive Bankruptcy

Some debt will survive bankruptcy if a creditor files a motion in court to prove that the debt shouldn’t be discharged. If a creditor can successfully object to a debt arising from your fraudulent actions or recent credit card charges for luxuries, those debts will be waiting for you after your bankruptcy. 

Fraud, however, requires intentional conduct.  If a creditor can prove that a debtor intentionally misrepresented income and or assets, the charges will stick. The bankruptcy code and the courts have a mechanism for assisting creditors who are in this position. It’s presumed that approximately 90 days before a bankruptcy is filed, a debtor knew he or she was in financial trouble and would not be able to repay extensions of credit made during that interval. 

There Are Exceptions, But Not Many

But if you’re sick, or your child is ill and has to go to the emergency room and you get a $950 bill that you place it on your credit card, this could be considered a non-dischargeable purchase. Necessities are exempt from presumption of non-dischargeability. The same is true of necessities like food, electric bill, diapers, medicine, or if the roof on your house collapsed in a tornado. The Lanigans will address this or like situations on a case by case basis.

Lanigan and Lanigan will work with you to determine what the best options are for your financial situation. You may find out that bankruptcy is not the best solution. There are many ways to handle your economic problems. To be certain, consult with Eric Lanigan and Roddy Lanigan, experienced bankruptcy attorneys who provide legal representation with a personal touch.