Reasons to Avoid Credit Card Charges If You Are Planning for Bankruptcy
Whether you are considering making purchases on your credit card as the holiday season approaches, or you are planning to make a relatively large purchase to travel to see family members or to buy a gift, it is important to reconsider making charges if you are planning to file for bankruptcy. Charges on general bank credit cards, as well as store-specific credit cards, are usually a bad idea if you are anticipating a bankruptcy filing in the next few months. Our experienced West Palm Beach bankruptcy attorneys can say more about why it is important to prevent using your credit card unless a purchase is absolutely necessary. The following are the top reasons to avoid credit card charges if you are planning to file for bankruptcy.
Debt Likely Will Not Be Dischargeable
First, it is critical to know that US bankruptcy law can identify recent credit card charges of higher amounts, and those that are for non-necessities, as nondischargeable debts. Generally speaking, any charges you make with a single credit of more than $800 (this amount may change after March 31, 2025) in the 90 days before your bankruptcy filing will be considered a purchase for “luxury goods” or “luxury items” and will not be dischargeable.
To be clear, the purchase does not have to be for something that seems objectively like a “luxury item.” Anything that is purchased over the $800 amount that is not reasonably necessary for you to support yourself or your family can be considered a “luxury good” — including, for example, flights to visit family members or gifts of smaller value that together total more than $800. You should know that cash advances on a credit card of more than $1,100 in the 70 days prior to a bankruptcy filing will also be nondischargeable. Accordingly, you should not assume you can get around the “luxury goods” rule by taking out a cash advance instead.
Bankruptcy Fraud Allegations Are Possible
In addition to accruing nondischargeable debts, using your credit card in the months immediately preceding a bankruptcy filing could also lead to allegations of bankruptcy fraud. If you make charges that you do not intend to pay back (because you assume they can be discharged if you file for bankruptcy), or if the court believes you did not intend to pay back that debt, an issue of presumptive fraud could arise in your case.
If you have already charged debt on a credit card and have plans to file for bankruptcy soon, you should discuss your options with an attorney. It might make sense to wait to file, or you may have other options available to you depending on the type and amount of debt charged.
Contact a West Palm Beach Bankruptcy Attorney Today
Filing for bankruptcy is often a complex process, and it is important to have one of our experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller who can assist you from the very beginning. Whether you are simply considering a bankruptcy filing or you feel ready to file, one of our attorneys can answer any questions you have and can help you to get started. Do not hesitate to reach out to us for assistance.