Bankruptcy

Shall I Rack Up My Credit Cards to the Max Before I file My Chapter 7 Bankruptcy?

By Joseph McDaniel, Esq.

Maxing out your credit cards just prior to filing is generally considered rude, crude, and fattening by the credit card companies themselves, and that only seems fair.

They set up a deal with you based on your expressed willingness to pay as agreed on the credit card, and loading them up to the limit just before filing a bankruptcy just looks bad.

That's why there's a presumption that if you rack up credit card charges prior to your bankruptcy filing, they won't get scraped off. The relevant portion of 11 USC 523 is the following:

"(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable"

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There is a moral here: if it seems like it ought to be the wrong thing to do, it probably is.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 02, 2009 (boomark / email).