Can I run up my credit card balances before I file bankruptcy?

If you run up your credit card balances right before filing for bankruptcy, the debt might not be wiped out by your bankruptcy.

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You can generally discharge credit card debt in bankruptcy. Whether your credit card debt is $1,000 or $100,000, the bankruptcy discharge you receive at the end of a successful bankruptcy case will wipe out your liability on the debt. But if you rack up credit card debt with fraudulent intent, it most likely won't be discharged in bankruptcy. Charging your card when you know you'll be filing for bankruptcy is almost always considered to be fraud.

Using Your Credit Card When You Plan to File for Bankruptcy

Running up your credit card balances when you intend to file bankruptcy is a fairly clear case of intent to defraud your creditors. If you do so, the credit card company can file a nondischargeability complaint in your bankruptcy case, asking the court to declare the debt nondischargeable. (For more information about nondischargeability complaints, see Nondischargeability Complaints in Bankruptcy.) If the lawsuit goes in the credit card company's favor, you will have to repay the debt.

Charging Luxury Goods or Taking Out Cash Advances Before Bankruptcy

Even if you run up the balances on your credit cards without actual intent to defraud the creditor (for example, if you intend to repay every cent), you might still get in trouble if you used the credit cards for luxury goods and services, or if you took out cash advances, and you did so within a couple of months before you file your case. Here's why.

  • If you use your credit cards within 90 days before filing bankruptcy for luxury goods and services aggregating more than $650, fraud is presumed.
  • If you use your credit cards for cash advances totaling more than $925 within 70 days before filing bankruptcy, fraud is presumed.

In these cases, you will have to show that you did not have fraudulent intent, either by providing evidence that you intended to repay the debt or that you did not intend to file bankruptcy (typically, you should show both).

The Credit Card Company Must Challenge the Discharge of the Debt

In any case, your credit card debt will be discharged unless the credit card company files a nondischargeability complaint. (To learn more about these, see Adversary Proceedings in Bankruptcy.) If the credit card company fails to notice your card activity or does nothing, the debt will be discharged.

However, most credit card companies will carefully review all your purchases and other activity on the card that occurred before the bankruptcy filing. If you run up your credit card balances and then file bankruptcy, you will likely have to repay the debt. It is best to stop using your credit cards, period, if you are having financial difficulties.

To learn more, check out Nolo's section on Credit Card Debt and Bankruptcy.

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