Filing for Bankruptcy? A Word of Caution

filing for bankruptcy, credit card spending, man making purchase

If you know you will be filing for bankruptcy, here is a word of caution about making charges on your credit cards.

Assume that you have been injured and have not been able to work for almost a year.   Recently, you received some good news when you learned that your employers or your insurance company has agreed to pay for a much-needed surgery.   The surgery is scheduled for the first week in January, just after the holiday break.   You have more than $5000 still available on your credit card.   It is tempting to use that card so that your family can have a good Christmas.   Should you?

Consequences of Credit Card Spending Prior to Bankruptcy

If you file for bankruptcy and list your credit card company, it is possible that the company can contest your discharge as to that debt in the bankruptcy court.

Why?

The Bankruptcy Code permits the creditor to defeat a debtor’s discharge if the creditor can prove that the debtor made the charge with the intention of filing for bankruptcy.  The creditor cannot always prove that this occurred, but if the debtor spent lavishly immediately after the debtor sought advice from a bankruptcy lawyer, some bankruptcy courts have been willing to make a finding that the debt was incurred when the debtor knew that he or she was going to file for bankruptcy.

No competent bankruptcy attorney would ever advise his or her client to run up charges on a credit card and then attempt to discharge them by filing for bankruptcy.  It is vital that you be completely open and candid about all of your financial affairs with your attorney.  In the case described above, if the debtor were to make those charges it is almost certainly the case that the debtor did not disclose his or her intentions to their attorney.

We at the Bankruptcy Advocates have counseled clients for more than 35 years.   Over those years we have counseled debtors in every conceivable financial scenario.  We enjoy our work because we are able to give our clients hope.   Give us a call.  The first consultation is always free.