I just put some big charges on my credit card. Should I wait to file for bankruptcy?

Learn what you should know about filing for bankruptcy after recently using your credit cards.

By , Attorney

Question

I had some last-minute expenses, so I decided to put big charges on my credit card. Should I wait until I have paid the card off to file for Chapter 7 bankruptcy?

Answer

If you put large charges on your credit card shortly before filing for bankruptcy, your credit card company might argue that the charges shouldn't be wiped out by your bankruptcy discharge. You might be able to avoid problems by delaying your bankruptcy filing if you weren't planning on filing for bankruptcy when you charged the purchase. However, you could run into trouble if you knew you couldn't pay when making the purchase and never planned to make good on the obligation.

Read on to learn more about the risks of filing for bankruptcy if you recently used your credit cards. For more on issues regarding your credit cards in bankruptcy, see Credit Card Debt & Bankruptcy.



When Your Credit Card Charges Might Be Nondischargeable

Bankruptcy law states that any debt obtained by fraud, misrepresentation, or false pretenses is nondischargeable in bankruptcy. For bankruptcy purposes, this includes credit card charges or cash advances you never intended to pay back when you used your card.

Generally, it can be difficult for credit card companies to prove fraud in bankruptcy court because they must prove you had no intention to pay back the debt when you incurred it.

However, in certain circumstances, the credit card company has an easier time because the law presumes that your credit charges or cash advances were fraudulent. Your charges wouldn't be discharged unless you can prove otherwise in these situations.

Credit card charges and cash advances are presumed fraudulent and nondischargeable under the following circumstances:

Charges for luxury items within 90 days of bankruptcy. Those charges are presumed to be nondischargeable if you charge more than $800 on a single credit card for luxury goods or services within the 90-day period before filing your bankruptcy. Luxury items include goods and services you don't reasonably need to work and live.

Cash advances within 70 days of bankruptcy. Similarly, if you obtain cash advances of over $1,100 in aggregate during the 70 days preceding your bankruptcy filing, those advances are also presumed nondischargeable.

Figures are valid for cases filed between April 1, 2022, and March 31, 2025.

The Presumption of Nondischargeability

If a credit card company wants to have your recent charges declared nondischargeable, it must file a complaint in bankruptcy court and object to your discharge in what is known as an adversary proceeding. If you incurred the charges in question during the presumption period, you must prove that the charges weren't fraudulent and shouldn't be discharged. The switching of the burden of proof to you makes the credit card company's job much easier.

Once the presumption period has passed, the burden shifts to the credit card company to prove fraud. Keep in mind that it's never a good idea to attempt to circumvent the rules. The court could view such actions as evidence of fraudulent intent.

Also, even if you're beyond the presumption period, the court can still consider factors such as the length of time between the charge and your bankruptcy, payments you made, or if you consulted a bankruptcy attorney before charging your card.

The bottom line is that saving a few dollars by wiping out a luxury charge in a bankruptcy case isn't worth the potential problem you could bring on yourself. Not using your credit cards after speaking with a bankruptcy attorney or once you realize that you need to file for bankruptcy is the most prudent course of action.

Learn more about adversary proceedings and fraud defenses in bankruptcy. For more articles on when to file your bankruptcy petition, see Timing for Bankruptcy Filing.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated April 23, 2022

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