As an Asheville bankruptcy attorney, I see my bankruptcy filings increase during the months of January and February.People resolve to clean up their financial lives as part of their new year’s celebration.When I see people raring to go for a bankruptcy case in January, I frequently explain that they need to wait a couple months before we file their case.
Debt Free in the New Year?
Purchases Prior to Filing a Bankruptcy Case
Generally speaking, debts incurred by fraud do not get discharged in bankruptcy.If you were to purchase Christmas gifts immediately prior to filing for Chapter 7 bankruptcy, and used a credit card to pay for them, few people believe those debts should be discharged.When you make a purchase knowing that you will never have to pay that debt back to a creditor because of a bankruptcy, the Court views that debt as non-dischargeable.
How Do Creditors Know If You Intend to Pay a Debt Back?
Most of the time, they don’t.Creditors usually have the burden of proving a client’s subjective intent at the time they made the purchase. That is very difficult, and creditors rarely object to bankruptcy discharges when they have the burden of proof. However, in a case where a client has incurred consumer debts in excess of $550 to a single creditor within 90 days of filing a bankruptcy case, there is a presumption of abuse of the bankruptcy system.For cash advances, the trigger is $825 within 70 days of filing a case. In either case, if the presumption of abuse arises, the consumer has the burden of proof to show that their purchases were not abusive. Normally, I only hear from creditors when their computers have detected a presumption of abuse.
The Good News
Typically, you will not hear from a creditor during a bankruptcy case unless the presumption of abuse outlined above is triggered.That is, if you have not spent more than $550 on a single credit card within 90 days of your case, you likely do not have to be concerned about a creditor objection.An easy answer to spending more than the amounts listed above is to simply stop using the cards and wait until your recent purchases are older than 90 days.
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