Understanding “Luxury” Debt and Consumer Bankruptcy
If you are planning to file for personal bankruptcy and have recently accrued debts that you want to include as part of your bankruptcy estate and your bankruptcy filing, it is essential for you to understand the relevance of “luxury” debt and how it could affect your bankruptcy case. Generally speaking, “luxury” goods or services are not determined based on the type of good purchased or service paid for, but rather by the amount of money spent on a particular product or service and in close timing proximity to the filing of your bankruptcy petition. Not only are luxury goods and services not eligible for discharge in a Chapter 7 or Chapter 13 bankruptcy case, but they can also give rise to questions of bankruptcy fraud.
What is luxury debt, and is this something that could be applicable to your bankruptcy case? Consider the following information from our West Palm Beach bankruptcy attorneys.
Luxury Debts: Price Tag and Timing of the Purchase
What is a luxury debt? In the simplest terms, it is a charge of more than $900 (up through March 31, 2028) to a single creditor within 90 days from the date of filing for personal bankruptcy. When a person makes a luxury debt charge for goods or services that meet the definition we just provided, there is “presumptive fraud,” which means that the debt is not dischargeable.
In addition, any cash advances from a single creditor totaling more than $1,250 (up through March 31, 2028) within 70 days of the date that you file for bankruptcy are also nondischargeable and will trigger the “presumptive fraud” rule.
Exceptions to Consider to the Luxury Debt and Cash Advance Rules
What if you need to charge a major home repair in order to continue living in your house with your family? Or what if you needed to charge a repair to your vehicle in order to get to work? For another example, what if a medical emergency arose and you needed to put a health care payment on your credit card? These types of charges, along with others, may initially appear as “luxury” debts because they may involve a charge of greater than $900 to a single creditor in the 90-day period prior to your bankruptcy filing. However, you can avoid the “luxury” debt label and presumptive fraud rule if you can show that a charge was reasonably necessary for your support or maintenance, or for your family’s.
Cash advances are more complicated since there is no way to show where the case went to in the same way that you can provide detailed and objective evidence of a credit card charge that appears initially as a luxury debt.
Contact a West Palm Beach Bankruptcy Attorney for Assistance
If you have recently accrued any debt that could be considered luxury debt, it is essential to seek advice from a bankruptcy attorney before you move forward with a filing. There may be ways to limit the impact of a luxury debt purchase on a credit card (or a credit card cash advance) on your bankruptcy case. Moreover, there are some exceptions, as we noted above, when a purchase that seems to be a luxury debt may in fact have been a necessity. One of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC can speak with you about your financial circumstances and your bankruptcy plans. Contact us today.
Source:
law.cornell.edu/uscode/text/11
