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A.J.
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4296
Experience:  Experienced consumer bankruptcy attorney.
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Can i use my credit cards to make purchases before i file

Customer Question

Can i use my credit cards to make purchases before i file bankruptcy
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  A.J. replied 1 year ago.

SavyLawyer :

Hello, and thank you for contacting Just Answer. My name isXXXXX am a bankruptcy law professional, and I look forward to answering your question this evening.

SavyLawyer :

While there is no precise prohibition on using credit cards right before a bankruptcy, doing so can cause some potentially very bad consequences for you and your bankruptcy.

SavyLawyer :

Using a card right before filing for bankruptcy, particularly on non-necessary or luxury items, will almost always be considered fraudulent purchases, and at best those debts won't be discharged (meaning you would still owe on them). In addition, such behavior could cause the entire bankruptcy to be dismissed on fraud grounds, leaving a considerable period (at least 180 days) until you can file again.

SavyLawyer :

Ultimately the issue is one of intent, and if the court believes that there was fraudulent intent (meaning using the bankruptcy code to defraud creditors) the debts won't be discharged and your case may even be dismissed, leaving all of your debts in place.

SavyLawyer :

So, in short, while technically you can use credit cards right up to the date of bankruptcy, doing so, particularly in large amounts, for cash advances, or on luxury items, may raise a presumption of abuse which could prevent the discharge of individual debts, or even cause a discharge of the bankruptcy case, leaving all of the debts in place. Consequently, it is a very bad idea to use any credit lines too close to the bankruptcy filing itself.

Customer: So the only thing i have in my name is XXXXX XXXXX and its still wirth 20,000 however my dad has a lien on it can they take my car?a
SavyLawyer :

If you have $20,000 in equity in the car, then potentially there would be risk to it in a chapter 7 bankruptcy, yes. Presumably if your dad has a lien on the vehicle that means that a debt is owed to him on the vehicle. Depending on how much equity you actually have in the vehicle, yes, any remaining equity could be at risk. If the bankruptcy trustee were to seize and sell the vehicle, they could then pay a portion of your creditors (one of which could be your father).

SavyLawyer :

Now, the lien may make the bankruptcy trustee think twice about trying to seize the vehicle, as liens typically survive a chapter 7, and the trustee may not want to have to deal with seizing and selling an asset if most of the money is going to go to a creditor with a security interest such as a lien. So, again, this ultimately depends not just on how much the vehicle is worth, but how much equity you actually have in the vehicle (value minus the amount you owe or the value of the lien against it).

SavyLawyer :

I hope this helps further, and let me know if you have any additional questions. Otherwise, please remember to RATE my answer so that I can receive credit for my work.

Customer: My lawyer told me to tell the courts i owe my dad the money for the car
A.J., Attorney
Category: Bankruptcy Law
Satisfied Customers: 4296
Experience: Experienced consumer bankruptcy attorney.
A.J. and 3 other Bankruptcy Law Specialists are ready to help you

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