Even if you aren’t considering bankruptcy right now, you are probably reading this because you are in financial trouble. Stop using your credit cards! If you do end up seeing an attorney, continuing to use your credit cards could make the purchases nondischargeable. “Nondischageable” is fancy lawyer talk that means “you are stuck with this debt despite your bankruptcy”. In fact, I often tell my clients to delay filing their bankruptcy cases until at least 90 days after their last purchase or transaction on the card. I watch for this issue with my clients to give them the best possible chance of getting a discharge and avoid extra legal fees.
If you run up a cumulative total of more than $500 for luxury goods or services on a single credit card within 90 days before filing for bankruptcy, the purchases are presumed to be fraudulent and potentially nondischargeable. For cash advances, the trigger for presuming a debt to be nondischargeable is a cumulative total of $750 to one creditor incurred within 70 days prior to the filing of the bankruptcy petition.
If a creditor feels that you incurred debt without the intent to repay it, they can file a lawsuit in bankruptcy court called an adversary proceeding. The purpose of an adversary proceeding is to have the debt declared nondischargeable. The importance of not using your credit cards prior to filing bankruptcy is that you can be forced to prove that the debts were not fraudulently incurred.
The cost of defending an adversary proceeding will often exceed the cost of filing a bankruptcy petition. In bankruptcy, an ounce of prevention truly is a worth a pound of cure. If you stop using your creditor cards before filing for bankruptcy, you greatly reduce the chance of spending thousands of dollars in extra legal fees to defend an adversary proceeding.
If you are in Southern California and are considering filing for bankruptcy, stop using your credit cards and call us today at (619) 448-2129 to learn about your debt relief options.