Don’t Max Out Your Credit Before You File For Bankruptcy

It is very important that you keep in mind that maxing out your credit card before you file for bankruptcy may result in some of that debt not being eligible for dismissal. There are so many people in America that are suffering from debt issues because of world issues such as COVID-19 or financial issues. If you find yourself in this awful position like so many Americans, filing for bankruptcy can be just what you need in order to get yourself and your family out from underneath all of that credit card debt, as this type of debt is able to be wiped out during chapter 7 bankruptcy filings. However, excessive use of your credit card while fully knowing that you are going to be filing for bankruptcy can actually be filed as fraud and can result in these credit card debts not being discharged during a bankruptcy filing.

Discharging Credit Card Debt

Most people who file for bankruptcy can see their credit card debt discharged or limited throughout chapter 7 or chapter 13 bankruptcies (wiped entirely in chapter 7 and built on a limited payback plan in chapter 13). However, credit card debt that was racked up right before filing for bankruptcy can be considered fraud, and will not be forgiven. This is because when you use a credit card you are being lent that money by the credit card company. Under federal bankruptcy laws, credit that is obtained in this situation is considered to be obtained by fraudulent means and thus is not dischargeable.

Plan Ahead

While there will be times you need to make credit card purchases, it is important that when you realize you are heading towards filing for bankruptcy that you limit your use of your credit card and keep an eye on your spending.

This post was written by Trey Wright, one of the best bankruptcy lawyers in Tallahassee FL! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.

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