There are a number of things you can and should do before filing for bankruptcy, but running up your credit cards is not one of them. Generally, you can discharge credit card debt in bankruptcy, whether it is $1,000 or $100,000. However, if you rack up debt with fraudulent intent, it will not be discharged in bankruptcy, and you may be considered to have committed fraud.
Clearly, if you know that you are about to file for bankruptcy, and you choose to run up your credit card balances because you know you will not have to pay it back, you are trying to defraud your creditors. If that occurs, the credit card company can file a complaint in your case and ask the court to declare the debt non-dischargeable. If the bankruptcy court agrees with the credit card company, you will have to repay that debt.
Although you can discharge credit card debt in bankruptcy, the bankruptcy courts are accustomed to people racking up charges on their cards and then filing for bankruptcy. Under bankruptcy law, if you use your credit cards within 90 days before filing for bankruptcy for luxury goods and services of over $650, the court will presume fraud. Also, if you took out cash advances on your cards for more than $925 within 70 days before filing for bankruptcy, fraud is presumed. It will then be up to you to show that you did not have fraudulent intent. You can do that by providing evidence that you intended to repay the debt or that you did not intend to file for bankruptcy, or both.
If your credit card company does not file a nondischargeability complaint, your credit card debt will be discharged. In some cases, the credit card company may fail to notice your spending activity once receiving notice of your bankruptcy, or the company may notice and take no actions.
However, in most cases, credit card companies carefully review all activity on the card that occurred before the bankruptcy filing. This helps them avoid being defrauded, and can result in the company getting some of its money back.
Therefore, if you are considering bankruptcy as a way out of your financial mess, it is best to stop using your credit cards in order to avoid being forced to pay back those charges. If you must use the cards, it’s critical that you use the cards for the bare necessities only, and not for luxury items that you do not need or cash advances.
If you are in over your head with credit card debt, it’s important that you speak with a qualified bankruptcy attorney. The attorney can advise you on whether or not bankruptcy is the right course of action. If you are in the Atlanta area, call the Atlanta bankruptcy attorneys at Holston & Huntley. Call us today- consultations are free and you are under no obligation to use our services. We serve Metro Atlanta Georgia as well as Birmingham Alabama including surrounding areas.