Credit Cards and Bankruptcy
The purpose of the Bankruptcy code is to give the honest individual the chance for a fresh start. This can mean discharging one’s obligation to pay any of their unsecured debts such as credit cards. However, the person filing must be sure that they conducted their affairs and accounts honestly, openly and properly.
It is not appropriate for one to “run up” their credit card balances prior to their time of filing. It is always best to have as little activity as possible within one’s credit card accounts in the months leading up to a bankruptcy filing. If, however, there has been credit card activity in the recent time prior to filing, it is important to determine what types of charges occurred. Charges can be for “luxury” goods/items such as dinners or trips and the like or for necessities such as home repairs and groceries. The types of charges made will be important.
When one files for bankruptcy, they are looking to receive a Discharge Order. This means the individual is no longer legally responsible to pay back certain bills, such as credit card balances. However, if a creditor has an issue with the types and/or amounts that have been charged by one prior to filing for bankruptcy, they can sue the individual within the bankruptcy court and seek an order determining that all or a portion of their debt shall not be deemed discharged or thus shall survive the Bankruptcy and remain the legal responsibility of the filing party.
There is something referred to as the “presumptive window of abuse.” This means that certain transaction/charge amounts that take place within a certain period of time prior to a bankruptcy filing have a presumption of being non-dischargeable. Pursuant to section 523(a)(2)(c), charges of more than $675.00 incurred within ninety (90) days of a bankruptcy filing for luxury goods or services or cash advances of more than $950.00 on any one line of credit in the seventy (70) days prior to a bankruptcy filing will be difficult, if not impossible, to discharge. The bankruptcy code clearly notes that “luxury goods or services” does not include goods or services that are reasonably necessary for the support or maintenance of the filing party or its dependents.
If you want your bankruptcy to go through smoothly and without fanfare, the less activity and charges that are contained within your credit cards, the better one’s outcome will be. In this case, less is clearly more. At Reinheimer & Reinheimer we will go through your accounts thoroughly to be sure the client does not run afoul of the bankruptcy code and its limitations on account activity.
