January 29th, 2009 by Reed Allmand 
Many debtors filing for bankruptcy are under the gun financially which causes them to "rob Peter to pay Paul" in a game that I will call "credit card musical chairs." In an effort to keep their financial house of cards from tumbling many debtors use revolving credit to pay for even some of the most basic items such as food and rent, even withdrawing cash from one card to pay the minimum balance on another. But according to bankruptcy law, once a debtor begins to consider filing for bankruptcy if he/she uses lines of credit, the use of that credit may be considered fraud.
For example, if a debtor meets with a bankruptcy attorney then goes out and purchases a $1000 worth of "stuff" on a credit card that he/she later includes in a bankruptcy, the bankruptcy discharge of those charges may be challenged by the creditor. The creditor may claim that the debtor knew that they were going to file for bankruptcy and abused the credit card by making purchases knowing the debt would be discharged in bankruptcy. If a debtor is found guilty of defrauding the bankruptcy system, at best he/she will be denied a bankruptcy discharge and at worst the debtor will end up serving prison time.
The solution is to cease using your credit cards and other lines of credit once you begin considering bankruptcy.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
View all posts by Reed AllmandSubscribe
Subscribe to our e-mail newsletter to receive updates.
