Even people who know almost nothing about bankruptcy know that Chapter 7 bankruptcy wipes out their credit card debt. Once a person files and qualifies for bankruptcy they are assigned a trustee who analyzes their debts, separating out the non-dischargable obligations like child support and tax bills from dischargable claims such as medical bills and credit card bills. Creditors in the latter category are essentially last in line for compensation from the debtor’s remaining assets, and that means that you’re off the hook for charges that have been racked up on your Visa or Master Card. But that doesn’t mean that you’re free to go on a spending spree in the days before you file. Here’s why.

Credit card companies are well aware that some bankruptcy filers will try to game the system, making large purchases that their filing will allow them to skip paying. But those companies have the right to object to purchases that are disproportionate to previous spending habits. Though purchases for necessities like food or medical care are permissible, buying luxury items in the three months prior to your filing are going to set off alarm bills, and are likely to be disallowed from your discharge. In other words, you will be on the hook for paying for them.

People who are in debt are often in desperate straits, and if that is your situation it doesn’t mean that you shouldn’t use your credit card to pay for the things that you need like food, shelter, or medicine. You can even stop making your minimum credit card payments if you need the money for essentials. The credit card companies are likely to shut your card down but if you are close to filing, those accounts are going to be closed anyway. But using your credit card for large purchases on nonessential items like gifts, clothes, and especially luxury items in the three months before you file can lead to charges of fraud, and leave you footing the bill for things that you probably didn’t need in the first place.

Considering bankruptcy can be stressful and confusing. The best way to move forward is to work with an experienced bankruptcy attorney who can provide you with the answers to all of your questions. Contact us today to set up a time to talk.

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