Can I Make Credit Card Purchases Before Filing for Bankruptcy?
When an individual is considering the possibility of filing for bankruptcy, or has even taken steps to plan for a bankruptcy filing, it can be difficult to completely change your financial habits in the weeks or months leading up to the bankruptcy filing. And in some cases, it may be necessary to continue making the same purchases or charges that you have been accustomed to making out of necessity. We often receive questions from debtors about making credit card purchases in advance of a bankruptcy filing, wondering if they can still use their credit cards. The answer is not as simple and straightforward as you might think, and the answer is, in most circumstances, “it depends.”
What are some of the considerations you need to be aware of before using your credit card prior to a bankruptcy filing? Our West Palm Beach bankruptcy lawyers can explain.
Purchases May Not Be Dischargeable If They Are Classified as Luxury Goods or Services
First, it is essential for you to know that certain purchases on a credit card, depending upon when you make them (and how close that timing is to when you file your bankruptcy petition), may not be dischargeable because they will be classified as luxury goods, items, or services. Now, it is essential to understand that the terms “luxury goods” and “luxury services” may include but more than you think. In short, credit card purchases can be classified as luxury goods or luxury services if the charges are for anything that is not reasonably necessary for you to support yourself or your family.
A purchase made to a single creditor or retailer of $800 or more generally cannot be discharged unless you can show that it was reasonably necessary for your family’s support (such as a payment for a high electric bill, or a charge made to a doctor’s office for necessary care. Courts will assess purchases on a case-by-case basis to determine whether they count as luxury goods or services and cannot be discharged. In general, charges of $800 or more to a single merchant will be assessed for their “luxury” classification if they are made within 90 days from the date of the bankruptcy filing.
Cash Advances Also May Not Be Dischargeable
You might be wondering if you can avoid the issue of luxury goods or services if you simply take out a cash advance on one or more of your credit cards, but you cannot get around the issue this way. Cash advances that are taken out within 70 days from the date you filing your bankruptcy petition are also presumed to be nondischargeable.
Beyond the nondischargeability of credit card charges and cash advances discussed above, these types of charges may also, depending on the circumstances, result in allegations of bankruptcy fraud. To avoid these issues, you should discuss all of the details of your case with a lawyer.
Contact Our West Palm Beach Bankruptcy Attorneys Today
Do you have questions about filing for bankruptcy, or concerns about the dischargeability of specific debts? Our firm has years of experience representing individuals and businesses in many different types of bankruptcy cases, and we can answer your questions today. Do not hesitate to contact an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan & Eller, PLLC to find out more about how we can help you and to make a plan to get started on your bankruptcy case.
Source:
law.cornell.edu/uscode/text/11
