Credit card use may be a concern for debtors experiencing job loss or those finding it a challenge to make ends meet. While juggling daily expenses many have a hard time meeting debt obligations. Bankruptcy may be the next step for those who are considering the option. Many consumers understand they should stop using their card before seeking protection. Yet, one topic of concern includes knowing when to stop using credit cards prior to filing.
When you file bankruptcy your attorney or trustee reviews the history of your credit cards. This includes understanding transaction history of the credit card in question. From this the trustee will get an idea on if the card was used properly or if there are intentions of fraud. Fraud includes racking up charges on the card with no intention of paying the company back because you knew you were filing for bankruptcy. Examples may include large purchases, big ticket items or luxury-related items. Luxury items or services that occurred with one creditor alone within 90 days of your filing may be seen as fraud.
Large cash advances completed within 70 days of the filing may also be reviewed. Large luxury-related purchases or cash advances may be objected in bankruptcy court by the creditor. In this case the debtor would have to prove their purchases were not fraudulent. Keep in mind, even if you didn’t purchase luxury items or take out extensive cash advances, the credit card company may object if you did indeed continue using your card with a past due balance. This may depend on the activity the card obtained before your filing.
It helps to stop using your card months in advance of your filing especially if you decide early on to file.